BSP Deputy Governor Alberto Reyes said a central bank circular will be issued soon to make effective Section 20 of the General Banking Law signed last year.
Reyes said the new policy which allows banks to use any of their branches as an outlet for the sales presentation of their subsidiaries or the banks’ non-allied undertakings, such as insurance and real estate, was deferred because of the closure of Urban Bank.
At that time, the closure of Urban Bank shocked depositors and investors who belatedly discovered that the bank’s subsidiary – investment house Urbancorp Investment Inc. – was the actual seller of various products offered and was independent from the bank’s own operations.
After reportedly bailing out Urbancorp, Urban Bank ran into liquidity problems of its own after channeling money to its subsidiary.
Reyes said to ensure the unfortunate experience won’t happen again, tighter requirements will be imposed on banks and their subsidiaries.
For one, non-allied undertaking of subsidiaries and banks will need to secure the approval of the BSP. – Rocel Felix