MANILA, Philippines — An interagency body is set to closely monitor and scrutinize conglomerates that include too big to fail banks for a more effective regulation and to promote financial stability.
In his weekly virtual press conference, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said the supervisory college for financial conglomerates created through a memorandum of understanding (MOU) signed by the members of the Financial Sector Forum (FSF) is scheduled for a pilot run in the second quarter.
“It is necessary to further strengthen the supervision of financial conglomerates given their interconnectedness and systemic importance. The supervisory college will foster more effective regulation of these entities and promote financial stability,” Diokno said.
Diokno, who is also chairman of the FSF, said the cross-sectoral supervisory college comprised of the BSP, the Securities and Exchange Commission (SEC), Insurance Commission (IC) and the state-run Philippine Deposit Insurance Corp. (PDIC) is set to finalize the rules and regulations on the supervision of financial conglomerates within the first quarter.
“The MOU governs the establishment of an inter-agency cross-sectoral Supervisory College, which will serve as a forum to facilitate cooperation and coordination on the supervision of conglomerates,” the BSP chief said.
It aims to enhance information-sharing, develop common understanding of risks, further improve risk assessment, foster a shared agenda for addressing identified risks, provide a common platform for communicating key supervisory concerns, and establish a synchronized supervisory plan related to financial conglomerate regulation.
The BSP supervises banks, quasi-banks and non-bank financial institutions, while the SEC oversees securities, corporations, partnerships and associations, investment companies and financing companies, among others.
On the other hand, the Insurance Commission regulates insurance companies, mutual benefit associations and other insurance intermediaries, while the PDIC serves as the deposit insurer.
“Financial conglomerates make up more or less 60 percent of the financial system. Given the systemic importance of these entities, FSF members felt the need to further strengthen supervision for a more effective discharge of their mandates under their respective charters,” Diokno said.
Since most Domestic Systemically Important Banks (DSIBs) are part of conglomerates wherein the BSP has no jurisdiction, Diokno said the partnership would help identify issues and concerns in non-supervised entities that could have an impact on too big to fail banks.
“This will be addressed by the supervisory college, which will serve as the forum to facilitate cooperation and coordination between and among the FSF member agencies,” Diokno said.
According to the BSP chief, the interagency body will be able to discuss the emerging group wide risks and vulnerabilities identified in the conglomerate including those from the non-BSP-supervised entities, which may have an impact on DSIBs.
Diokno explained that the financial supervisory college would take a micro prudential approach, while the Financial Stability Coordination Council takes more of a macro prudential approach in tackling risks of contagion among different financial markets as well as the financial and real sectors.