BSP seeks supervision over investment houses

The Bangko Sentral ng Pilipinas (BSP) is proposing the transfer of supervision of all investment houses from the Securities and Exchange Commission (SEC) to the BSP to prevent cases similar to Urban Bank which collapsed reportedly under the burden of its failed investment house.

"Placing investment houses under the supervision of the BSP will subject them to the same strict discipline experienced by other investment houses with quasi-banking license," BSP Gov. Rafael B. Buenaventura said yesterday.

This would subject the investment houses, Buenaventura elaborated to rules on directors, officers, stockholders and related interests (DOSRI) and single borrowers' limit (SBL).

He acknowledged, however, that placing the investment houses under the supervision of the BSP will require legislation. The BSP is hoping that such a provision could still be included in the revised Securities Act which is still pending in Congress.

If that revision is not included in time, Buenaventura said the BSP could jointly work with the SEC to supervise investment houses.

At present, the BSP has no direct authority over investment houses except those that have a quasi-banking license and are affiliated with a bank.

Other investment houses are normally under the supervision of the SEC.

Investment houses perform "quasi-banking functions" with regard to the solicitation of investments and lending these out to borrowers.

The line, thus, blurs because some investors fall under the impression that their investment is a direct liability of the investment house and that when the investment turns sour they should be paid back their investment.

The BSP chief explained that placing investment houses under their supervision will ensure that the BSP "would become more strict in coming up with rules on what they cannot do."

Buenaventura also reiterated his position that trust licenses should no longer be given to institutions that do not have a bank or quasi-bank license.

Investment houses which are given a trust license are able to pool funds which they then invest in securities, real estate and other assets.