The memo, signed by BSP Deputy Governor Nestor A. Espenilla Jr., notified banks to acquire proper authorization from the BSP before marketing insurance policies in their branches, subsidiaries and affiliates.
The circular spelled out rules on the use of the head office and/or any or all branches of universal banks and commercial banks as outlets for the presentation and sale of financial products of their allied undertakings.
"The circular specifies that prior approval of the Monetary Board is required before banks can engage in cross selling of products and these products are limited to those of the banks‚ allied undertakings only," said Espenilla.
Moreover, banks offering insurance products should first get accreditation from the Insurance Commission (IC).
The BSP said banks failing to comply with regulations will be subjected to proper sanctions.
Espenilla noted the memo is a result of various reports that several foreign life insurance companies are operating in the Philippines without proper license and authorization.
Under the law, banks are allowed to sell insurance products at their branches but only if they acquire an insurance company. These transactions are called bancassurance.
The BSP said that before a local bank is allowed to engage in bancassurance or insurance cross selling, they have to first acquire equity in an insurance company or own at least five percent of shares.
As this developed, IC is preparing to issue guidelines to expand insurance products using banks’ branch networks. It is also considering the possibility of allowing subsidiaries of banks such as thrift banks to sell insurance products over-the-counter.
Currently, the BSP limits bancassurance regulations to the main banks and their allied units.
Thrift banks are not allowed to engage in bancassurance and the BSP is still determining if these banks will eventually be allowed to engage in such activity.