BSP allows thrift banks to go into cross selling

MANILA, Philippines - Thrift banks will soon be allowed to offer investment products under revised regulations set to be unveiled by the Bangko Sentral ng Pilipinas (BSP) to “open up” the “restrictive” practice of cross-selling.

“We actually have regulations on that which are somewhat restrictive. Under those rules, thrift banks are not allowed to cross-sell. That was actually revised,” BSP Deputy Governor Nestor Espenilla Jr. told reporters on Friday.

Cross-selling practices — or the offering of financial and investment products such as life insurance that goes beyond banks’ usual lending activity — are only allowed for bigger universal and commercial banks under BSP Circular 357 issued in 2002.

The regulation implemented Sec. 20 of Republic Act 8791 or the General Banking Law which gives banks the freedom to offer investment products to their clients through their respective investment houses.

Espenilla said revised rules will be unveiled before the year ends, targeted to give banks  “flexibility to broaden their platform” as far as the type of lenders allowed to cross-sell and the investment products to be offered are concerned.

Available products will be “split” into two groups: “simple” which will cover traditional credit and payment schemes such as credit cards and life insurance, and “complex” that will include variable life insurance — or the ix of investment and life policies.

Present rules do not distinguish between simple and complex products.

Espenilla said proper risks and client applicability disclosures — both meant as safeguards for people availing investment products — will also be introduced.

“We have already exposed these new regulations for comments and we are processing that now, digesting some of them in the proposal guidelines,” Espenilla said during the Chamber of Thrift Banks general membership meeting.

The BSP official said regulators want to ensure clearer standards and proper practice of cross selling privileges.

“They (cross selling products) seem to be very benign products because these are good investment environment. We are concerned about the day that this situation it will reverse at some point, it will correct at some point,” Espenilla said.

“Unless customers are made to understand what they are getting into, then we would have problem,” he explained.

“We believe that our banks ought to have that flexibility to broaden its platform. We just want to do it in the proper manner.”