Tetangco, Malinis favor stronger Financial Sector Forum

MANILA, Philippines – The Bangko Sentral ng Pilipinas (BSP) and the Insurance Commission (IC) is in favor of strengthening the Financial Sector Forum (FSF), a consultative body composed of heads of the Securities and Exchange Commission (SEC), the Philippine Deposit and Insurance Corp. (PDIC), BSP and the IC.

BSP Governor Amando M. Tetangco Jr. favors giving the authority (to the FSF) to issue joint circulars or joint memoranda that will cover the three basic sectors covered by the five government agencies.

“If there are issues that cross over to the differing financial sectors, they can be covered,” Tetangco, who was the keynote speaker at the 16th Insurance Congress of Developing Countries (ICDC), said.

IC Commissioner Eduardo T. Malinis was in favor of expanding the FSF mandate as the convergence of products and services of the banking and insurance sectors continue to expand.

Classic case is the practice of bancassurance, which allows insurers to sell its products with a bank’s branch network. But the bank must own at least five-percent equity in the insurance firm. Under BSP regulations, it is called cross-selling.

Insurers have also evolved hybrid products that are a cross between a life insurance and mutual fund. It is more popularly known as variable life or unit-linked product (VUL). The SEC is a government agency that regulates the mutual fund industry.

Tetangco cited the case of the Legacy Consolidated Plans group and the rural banks under its wing. The SEC is also the regulator of pre-need plan companies.

“As we have witnessed in this current crisis, the lines delineating the financial institutions that make up the financial system have become at times blurred, making improved collaboration among financial regulators exigent,” he explained.

Both the BSP and IC agreed that the convergence among different types of financial institutions, and convergence in the framework for financial regulation and supervision, requires a higher level of coordination and information among regulators.

The governor stressed that “there must be a conscious effort among regulators to devote more resources to the regulation of the conduct of business. There is often the temptation during a large-scale (global) crisis, such the one we are in at the moment, to speak only about systemically important institutions.”

However, the idea of resurrecting and forming a single entity is to regulate the entire financial system, similar to Singapore, drew mixed reactions.

“That needs legislation, that requires a lot of changes, it needs a lot of reviewing,” SEC Chairman Fe Barin said during the international confab yesterday.

But she agreed that stronger coordination as well as wider powers for the FSF could be favorable to the investing public.

The FSF, established in 2004, is essentially a voluntary cooperative endeavor of the concerned agencies to provide an institutionalized framework for coordinating the supervision and regulation of the financial system. It enhances coordination to improve supervision over the activities of financial conglomerates as well as coverage of entities that operate in the grey areas of supervisory boundaries.

However, it is not vested with any powers although member agencies re expected to cooperate. — TPT