THE BANGKO Sentral ng Pilipinas (BSP) is set to issue new guidelines this year that will allow banks to offer their customers insurance products from multiple providers.

“A draft circular amending the cross-selling guidelines is currently being finalized to consider the inputs we received from various stakeholders. It is targeted for issuance this 2025,” BSP Deputy Governor Bernadette Romulo-Puyat said in a speech at an event on Tuesday.

Under current BSP and Insurance Commission (IC) regulations on bancassurance, or the presentation and sale of insurance products by an insurer to bank clients, the bank and the insurer must also belong to the same financial conglomerate before bancassurance activities may be allowed.

The draft rules released by the central bank in 2024 proposed to expand the scope of an allied undertaking for the purpose of cross-selling, defining this as entities that fall within the bank’s financial conglomerate or entities having a contractual relationship with the bank resulting in joint ownership or shared responsibility for a business undertaking.

These contractual relationships include partnerships, joint ventures, or strategic alliances, the BSP said.

The rules allow cross-selling of financial products like simple insurance and collective investment schemes like variable unit-linked life insurance policies on a stand-alone basis or bundled with products of the bank.

“It opens the field… With this, we want to open up banks to outside of their own conglomerate. So, this opens banks to other players,” Ms. Romulo-Puyat told reporters on the sidelines of the event.

She added that this will allow more insurers to offer their products to bank customers “as long as there’s a contractual relationship with the bank and the insurance company.”

This will help boost financial health among consumers, she said.

“If you open it up to more players, more people can be insured,” Ms. Romulo-Puyat added. “Now, it’s financial health… We want Filipinos not only to have an account, but to have savings, to have insurance.”

Philippine Life Insurance Association, Inc. President Rahul Hora, who is the president and chief executive officer of The Manufacturers Life Insurance Co. (Phils.), Inc. (Manulife Philippines), told reporters at the same event that the new cross-selling guidelines would be beneficial for the industry as insurers would be able to expand their reach.

“That’s what we’ve been requesting because then it allows rural banks to start getting into partnerships, which then allows insurance companies to expand into other areas and geographically spread their business,” Mr. Hora said.

Insurance penetration — or premium volume as a share of gross domestic product, which shows the contribution of the industry to the economy — inched up to 1.89% as of March from 1.78% a year prior, latest IC data showed.

Insurance density — or the amount of premium per capita, which reflects the average spending of each individual on insurance — increased by 13.4% to P1,094.94 from P965.56. — A.M.C. Sy

BANKS may see changes in their deposit base as clients could reallocate their funds following the removal of tax perks for long-term deposits under the Capital Markets Efficiency Promotion Act (CMEPA), analysts said.

However, the impact on lenders’ funding and interest income may be minimal amid the low number of time deposit accounts in the banking system.

“Banks could see a modest shift in the composition of their deposit base, especially time deposits, which may slightly affect their interest income and funding sources in the short term,” Philippine Institute for Development Studies Senior Research Fellow John Paolo R. Rivera said in a Viber message.

“We don’t expect any impact on the volume of deposits in the banking system. We won’t be surprised if some funds shift to short-term deposits since there is no longer any tax advantage to long-term deposits,” China Bank Capital Corp. Managing Director Juan Paolo E. Colet said in a Viber message.

Under CMEPA, which took effect on July 1, interest income from deposit products, including savings deposits, time deposits, deposit substitutes, trust funds, negotiable certificates of deposit, and similar financial instruments, are now charged a uniform final withholding tax of 20%, regardless of holding period.

Previously, interest earned from time deposits with a term of five years and up was tax exempt. Time deposits of over three years but below five years also enjoyed varying preferential rates.

The law also effectively raised the final tax on interest income from foreign currency deposits to 20% from 15% previously, but only for residents.

Nevertheless, Mr. Rivera said the uniform tax rate could affect “influence investor sentiment, especially for those looking for higher returns from time deposits, bonds, and other interest-bearing instruments.”

“Retail depositors may not react strongly, but more sophisticated or high-net-worth investors might shift funds toward untaxed or more favorable instruments, including equities or real estate,” he said.

“However, the broader goal of CMEPA is to simplify the tax structure and enhance capital market efficiency so its impact on deposits will depend on how clearly banks communicate this to clients and how quickly the market adjusts,” Mr. Rivera added.

Bankers Association of the Philippines President and Bank of the Philippine Islands (BPI) President and Chief Executive Officer Teodoro K. Limcaoco said earlier this month that the removal of the preferential tax rates for interest earned from deposits will mostly affect the wealthy.

“For normal savings, deposits or people who do time deposits, like the ordinary Filipinos, there is no change at all,” he said.

For BPI, demand for long-term deposits has not been strong, Mr. Limcaoco said. “Even with our experience at BPI, the five-year time deposit wasn’t a very big market for us.”

“Large depositors were the people who used to do these five-year time deposits. They’re the ones with dollar FCDU (foreign currency deposit unit) accounts. Now they’re taxed at the same rate as you and I. We have small deposits. We’re always taxed by the percent,” he added.

Mr. Limcaoco said they do not expect demand for deposit products to be affected by CMEPA.

“You can put your savings into 30-day time deposits, one-year time deposits, or two-year time deposits. It’s the same tax that has always been there,” he said.

Also, with nonresident individuals and corporations still enjoying tax exemptions from their interest income from FCDU transactions with banks, this could “attract more large foreign funds, or help maintain them in the country, at the very least,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort added in a Viber message.

The measure passed by Congress had proposed to remove this exemption, but the provision was vetoed by President Ferdinand R. Marcos, Jr.

Finance Secretary Ralph G. Recto earlier said they do not expect CMEPA to discourage saving among Filipinos.

“There is no truth that CMEPA discourages people from saving and investing. Actually, CMEPA is not just a revenue bill, but an act to boost our capital markets and allow for greater participation, especially among ordinary Filipinos. Investing is now not just for the rich, but is for every Filipino who dreams of financial security and a better future, who can now achieve that by diversifying their savings and investments,” he said.

The latest Bangko Sentral ng Pilipinas data showed that the Philippine banking industry’s combined deposits rose by 5.4% year on year to P20.2 trillion as of end-March from P19.1 trillion previously.

This came as the number of deposit accounts climbed by 19.1% to 150.8 million from 126.6 million, while the number of depositors jumped by 16.7% to 134.5 million from 115.3 million.

Of the total deposit volume, time deposits stood at P5.78 trillion, with the number of time deposit accounts at just 1.77 million and the number of depositors at 1.31 million, according to central bank data. — A.M.C. Sy