Group-owned banks under close watch

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) is stepping up the supervision of financial institutions controlled by conglomerates in the country to preserve the strength and stability of the country’s financial system.

The BSP said it has intensified information sharing with the Securities and Exchange Commission (SEC) and the Insurance Commission to appropriately monitor crucial bank and non-bank linkages.

The BSP added that it is also undertaking the periodic updating of conglomerate maps to mitigate concentration risk in the financial system.

According to the BSP, the inter-agency body of financial regulators in the country known as the Financial Sector Forum is bulking up its regulatory muscle for effective supervision of financial conglomerates to prevent the double-leveraging of capital as seen in many other jurisdictions dealing with financial conglomerates.

“Regulators have to sharpen their focus on the effective supervision of financial conglomerates as potential stressors of supervisory muscle,” the BSP stressed.

The International Monetary Fund (IMF) through its April 2010 Financial System Stability Assessment (FSSA) Report cited the unique construct of the financial system in the conglomerated economy of the Philippines.

“The report further disclosed that majority of bank assets were controlled by banks belonging to a conglomerate or a conglomerate itself,” the BSP added.

Majority of the country’s banks and financial institutions are controlled by family-owned corporations and conglomerates.