MB sets limits on banks’ investments in non-allied enterprises

The Monetary Board, the policy-making body of the Bangko Sentral ng Pilipinas (BSP), will issue a new circular that would clarify the limits on bank’s investments in non-allied enterprises.

In the proposed circular, the MB said "for the purpose of determining compliance with the ceiling prescribed, the equity investment of the bank and equity investment of the bank’s subsidiaries shall be combined."

The circular will specifically amend a provision in the Manual of Regulations for Banks (MORB).

BSP deputy governor Alberto Reyes said the amendment will seek to clarify the existing regulations. "This will help banks in the computation of the 35-percent ceiling under this particular regulation."

"Some banks are saying that the existing law is not clear on the issue of investments of non-allied enterprises of banks," Reyes said.

Reyes explained that once this new amendment on the MORB takes effect, banks will have a clearer view on how to invest in non-allied enterprises such as the real estate business.

"For example, if BPI, which is a universal bank, and its subsidiary BPI Family Bank want to buy into a real estate company, their combined investment should not go beyond the combined 35-percent limit prescribed under the MORB," he clarified.

Under the proposed rules, "the equity investment of a universal bank, of its wholly or majority-owned subsidiaries, in a single non-allied enterprise shall not exceed 35 percent of the total equity in that enterprise nor shall it exceed 35 percent of the voting stock in that enterprise."

The old rule says that "equity of an EKB (expanded commercial bank) or its subsidiaries in any single non-allied enterprise shall not exceed 35 percent of the total subscribed capital stock nor shall it exceed 35 percent of the voting stock in the enterprise."

The amendment also simplified the existing regulation as the MB will remove the phrase, "the equity investment of directors, officers and stockholders owning at least two percent of the bank or of the bank’s subsidiaries."