BSP heightens shadow banking surveillance

MANILA, Philippines - The Bangko Sentral ng Pilipinas has heightened surveillance on shadow banking to ensure the stability of the financial system.

“We are addressing this via improved surveillance and collection of more granular data, especially in real estate and repo market, in coordination with other regulators and stakeholders,” BSP Governor Amando M. Tetangco Jr. said.

Shadow banking involves financial activities, mainly lending, undertaken by non-banks and entities not regulated by the BSP.

The increasing reach of shadow banking activities is a concern for policymakers across the globe as firms involved in this do not disclose their assets and do not also have access to formal liquidity support.

The Financial Stability Board, a group of central bankers, considers this a threat as policymakers are unaware by how big and how wide the reach of these activities are in their jurisdictions.

Rupert Thorne, deputy to the secretary general at FSB, said late last week members have been asked to look closely at shadow banking activities taking place in their areas.

“It is important that Asian countries… compare experiences and practices on how to manage the systemic risks,” Thorne said following the meeting of FSB’s regional consultative group for Asia in Bohol.

In late 2013, the FSB has already stressed a strengthened oversight of shadow banking activities is relevant in Asia.

But given these activities vary across countries, the FSB said there is a need to tailor regulatory response as policymakers should consider their own circumstances and also the existing measures in place.

Tetangco in December last year has said the central bank is committed to expanding existing surveillance in place to better monitor shadow banking activities especially those in the real estate sector. 

“It is important to develop surveillance tools that will help us detect potential vulnerabilities and the extent and nature of interconnectedness of shadow banking sector and the real estate sector to the financial system,” Tetangco said.

“These initiatives are being coordinated with counterpart regulators under the Financial Stability Coordination Council,” he continued.

The FSCC is an inter-agency body meant to monitor and address risks to the financial sector’s stability. This is made up of the BSP, the Department of Finance, the Insurance Commission, the Philippine Deposit Insurance Corporation, and the Securities and Exchange Commission.