Merger of BSP, SEC, IC into financial superbody pushed

The Securities and Exchange Commission is lobbying in Congress for the creation of a single financial regulator by merging the securities watchdog, Bangko Sentral ng Pilipinas (BSP) and the Insurance Commission (IC).

In a position paper submitted to the House, the SEC said lawmakers should consider moving towards the consolidation of all financial market regulations into a single entity to enhance efficiencies and enforce uniform regulatory standards for the financial markets.

Top securities regulator Lilia R. Bautista said lumping SEC, BSP and IC into a singular entity will tighten government regualtion over the financial markets and in turn curb corporate fraud and failures.

"Our legislators should seriously look at the single regulator concept. This will bring about cost-effectiveness and uniform regulatory approaches and enforcement," Bautista said.

Bautista said this is not an entirely new idea since other countries like the United Kingdom and Singapore have already established a single regulator as part of efforts to modernize and strengthen their institutions to keep pace with the changes in the financial markets and the economic environment as well.

In the United Kingdom, the superpowerful Financial Services Authority regualtes the banking, securities and insurance businesses. The same model was adopted by the Monetary Authority of Singapore this year.

Bautista said the move will allow the Monetary Board, the highest policy-making body of the BSP, to focus on its role of policy setting by transferring its regulatory powers to the central monetary authority.

"Right now, the MB is overburdened because apart from policy making it also looks into bank audits and related concerns," Bautista said.

She said bringing the institutions together will allow one to complement the other’s resources and prevent the duplication of functions.

"If there’s only one head, then regulators will know what’s going on with the banks and the non-bank financial intermediaries so there is better control of the market," Bautista said.

The BSP regulates the banking industry and formulates monetary policy while the SEC supervises the equities market, non-bank financial institutions and corporations.

Bautista said regulators need a remarkable degree of clarity, in ways which are often quite incompatible with "normal market practice", in order to make appropriate choices about how the markets should function.

International studies show that a regulatory agency which oversees all financial markets in the country would be able to rapidly carry successful ideas from one style of market to another.

Analysts, however, expressed concern about the single financial regulator concept, saying this could do more harm than good to the financial markets. "The most important worry about having a single regulator is the quality of leadership that such a super-agency can obtain. There is a tremendous concentration of power into a few hands in such an agency and this would attract power-seekers to these posts," an analyst said.

The Bankers Association of the Philippines (BAP), the umbrella organization of local commercial banks, said merging SEC, BSP and IC will entail new legislation and amendment of the country’s 1987 Constitution which limits BSP’s regulatory powers to the banking industry.

BAP said the BSP already has its hands full attending to the banking sector’s bad loan problems and governance concerns especially with respect to curbing money laundering. The proposal, if implemented, could weaken the BSP’s supervision of the banking sector.

The SEC and BSP have dual control over some areas and activities of investments houses. Investment houses which are subsidiaries or affiliates of banks are under the BSP because of their direct effect on their parent companies. The BSP has no responsibility over investment houses’ securities regulated activities while commercial paper registration and underwriting is left with the SEC.

Bautista said bringing BSP, SEC and IC together shall also put the issue on what regulatory agency should supervise the pre-need industry moot and academic.

Current events affecting the pre-need industry has again brought to fore the need to revisit the issue of what agency is the proper regulatory agency to oversee the operations and preneed firms. Lawmakers either favor the SEC or the IC to supervise the preneed industry.