Central bank issues rules on bank investments

THE central bank on Friday said it had issued guidelines on investment activities of banks and quasi-banks.

In a statement, Bangko Sentral ng Pilipinas said the policy-setting Monetary Board approved the risk guidelines on July 11 “to set out the regulatory expectations in managing risks arising from investment activities.” It didn’t provide a copy of the actual guidelines.

According to the statement, banks and nonbanks are exposed to a wide range of financial instruments including bonds issued by emerging economies, complex structured products and other tradeable assets.

Financial institutions must conduct due diligence before making an investment, it said.

Due diligence for new basic debt paper acquired for trading or short-term profit taking may be made at the option of the financial institution as long as the resulting positions from the investments are still within allowed limits.

The guidelines are meant to be applied proportionately depending on the profile of a supervised firm and its investments, since banks and nonbanks have different structures and ranges of investment activities.

“The new guidelines likewise take into account the lessons learned during the 2008 financial crisis and the relevant guidance set out in the Basel Core Principles for Effective Banking Supervision,” it said. — Karl Angelo N. Vidal