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The Regulation of Financial Conglomerates in the Philippines

The Regulation of Financial Conglomerates in the Philippines. by Natalia W. Santos. Introduction. Apart from the BSP’s consolidated approach to the supervision of banks, there is no framework for the regulation of financial conglomerates in the Philippines.

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The Regulation of Financial Conglomerates in the Philippines

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  1. The Regulation of Financial Conglomerates in the Philippines by Natalia W. Santos

  2. Introduction • Apart from the BSP’s consolidated approach to the supervision of banks, there is no framework for the regulation of financial conglomerates in the Philippines. • Financial Conglomerates defined as “Any group of companies under common control whose exclusive or predominant activities consist of providing significant services in at least two different financial sectors (banking, securities, insurance) - Tripartite Group, 1995

  3. Areas of Concern • Multiple or excessive gearing • Conflicts of interest • Contagion • Financial stability issues

  4. Financial Conglomerates in the Philippines • No formal definition adopted • Groups of financial institutions recognized in regulations • Banks, their subsidiaries and affiliates under the BSP’s regulatory ambit • Holding company system recognized in the Insurance Code

  5. Largest groups are those with universal or commercial banks as parents Smaller groups exist, with or without banks Financial Conglomerates in the Philippines Structure of the ATR Kim Eng Group Based on information on the PSE Website

  6. Regulation of Philippine Financial Conglomerates • Financial services industry regulated by the BSP, SEC, and IC • Oversight of groups largely accounted for by the BSP’s supervisory approach • BSP supervises banks, quasi-banks, their subsidiaries and affiliates • Rules on consolidated capital assessment; limits on equity investments, large exposures and credit concentrations; limits on loans to a single borrower, DOSRI and to subsidiaries and affiliates • Bilateral MOA with BSP • The Financial Sector Forum (BSP, SEC, IC, PDIC)

  7. Observations • Largest groups overseen by BSP • Unregulated entities • Financial institutions not examined by BSP • Shared concerns

  8. Recommendations • Address matter of unregulated entities under BSP supervision • Intensify coordination efforts • Establish concept of financial conglomerates in local context • Inventory of conglomerates • Identification of areas of common concern among agencies • Use existing structure of FSF to conduct activities

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