Thrift banks buck proposed BSP rule on cross selling

Thrift banks have raised a howl over the plan of the Bangko Sentral ng Pilipinas (BSP) to allow cross-selling but only by commercial banks (KBs) and expanded commercial banks with insurance firms as subsidiaries.

Banking sources said there is a strong clamor among members of the foreign business community and even involving officials from the US embassy who have begun lobbying for the BSP to extend the privilege even to those banks that do not have insurance subsidiaries or affiliates.

Under the law, banks are not allowed to sell non-bank instruments through their branches.

The Securities and Exchange Commission (SEC) has been strictly implementing this prohibition, at one point taking issue with the BSP over reports that Hongkong and Shanghai Banking Corp. were selling shares of offshore mutual funds through their branches in the country.

The SEC had ruled that banks were not allowed to sell such instruments unless they were duly registered with the commission and their sale to the domestic market has been approved.

According to BSP Governor Rafael Buenaventura, the government has no objection to allowing banks to sell non-bank instruments since this is already allowed to a certain extent, specifically if the bank concerned is selling products of its affiliates.

"The law already allows that anyway," Buenaventura pointed out.

"The question is if such a situation exists such that this policy would be applicable."

According to Buenaventura, the law allows banks to cross-sell. "For example, a bank with an insurance company as an affiliate could sell insurance products through their branches," he said. "But that is as far as the law goes."

Thrift banks have raised a howl, calling the proposed circular "biased" and urging the BSP to allow them as well to sell the products of their subsidiaries and affiliates.

Chamber of Thrift Banks (CTB) president Maria Flordelis Aguenza said the bias against thrift banks is unfair considering that some of the major thrift banks are even biggest and more reliable than medium-sized KBs.

"We will appeal (to the BSP) and I know they can be reasonable. There is the traditional thinking that thrift banks are unreliable and risky just because they are smaller than KBs," Aguenza lamented. The association chief is also the chief executive of Planters Development Bank.

She pointed out that there are thrift and savings banks which are better capitalized that small and medium-sized KBs, citing the case of Asiatrust Development Bank, BPI Family Savings Bank, and Planters Development Bank.

Then there are savings banks, which have very strong affiliations or mother units such as Philam Savings Bank, Insular Savings Bank, and Robinsons Savings Bank. While other thrift banks are affiliates of KBs and EKBs.

"I do not see why not just because we are thrift bank. We are better (capitalized) than most medium-size commercial banks. In fact, we are larger than 27 other KBs," Aguenza emphasized.

Earlier, foreign banks, insurance companies and even foreign business associations raised eyebrows went news came out regarding the proposed circular.

The American Chamber of Commerce, New York Life Insurance, and Standard Chartered Bank of the Philippines in separate interviews and press statements expressed dismay over the BSP plan.

They raised issues like giving some banks undue advantage, allowing affiliates of KBs and EKBs to cross sell, and include thrift banks in the circular’s coverage. Most argued that the global financial community has been increasing bancassurance practices while the circular reverses the same. –Ted Torres, Des Ferriols