Special-use trust funds exempted from reserves under new BSP rules

By Melissa Luz T. Lopez
Senior Reporter
NEW RULES exempting special-use trust funds from bank reserves will take effect next year, as the Bangko Sentral ng Pilipinas (BSP) streamlines rules for trust companies.
Circular 1025 signed by Bangko Sentral ng Pilipinas Governor Nestor A. Espenilla, Jr. on Dec. 13 prescribes that specialized institutional accounts under trust will be excluded in computing the required reserves for banks, as these will not be treated as deposits.
The rules will take effect Jan. 1 or 15 days after their publication in a newspaper yesterday.
BSP Deputy Governor Chuchi G. Fonacier said last month that the Monetary Board decided to remove these institutional trust accounts from the computation of required reserves of banks.
This includes arrangements created by institutions, foundations, agencies from both government and private sector players which are “primarily for charitable, religious, educational, athletic, scientific, medical, cultural, specialized lending or developmental projects,” according to existing BSP rules.
Ms. Fonacier said the proposal came from industry players. Prior to this change, the central bank official said imposing the reserve requirement on these special trust accounts “hinders the main purpose for their establishment.”
However, Ms. Fonacier noted that the new rule will have a “minimal” impact on bank liquidity.
A trust company acts as a wealth manager for a number of investors looking to generate profit from their funds. Already exempted from reserve computations are trust accounts held under administratorship, trust under indenture, custodianship and safekeeping, depository and reorganization, escrow, personal trust, executorship, and guardianship.
Also part of the list are employee benefit plans under trust, life insurance trust, individual and institutional pre-need plans, personal equity and retirement account, as well as legislated and quasi-judicial trust accounts.
The BSP has been updating rules covering trust firms over the past month. Last week, the central bank announced that trust companies will soon be required to set aside allowances for credit losses to align with tighter management standards under the Philippine Financial Reporting Standards 9.