BSP sets up rating system for trust units
The Bangko Sentral ng Pilipinas has established a rating system for trust entities to ensure that they observe prudent practices amid rising incomes and growing demand for financial services.
The BSP said the Trust Rating System was meant to evaluate performance of trust entities in terms of risk management.
The regulator has deemed it proper to establish the rating system to prevent excessive risk-taking in these times of enormous liquidity in the economy.
Under the system, the BSP will rate trust operations on a scale of 1 to 4 – with 4 being the highest – based on its performance in the following areas: capability of board of directors, trust committee, and senior management responsible in the administration and fiduciary business; soundness of operations, controls, and audits; adequacy of compliance with government instruments, applicable laws and sound fiduciary principles; prudent management of fiduciary assets; and earnings performance.
BSP examiners will use the rating system in their regular evaluation of trust entities starting July.
The rating of a trust entity will determine the level of supervision it will get from the BSP.
“The BSP endeavors to ensure that all trust entities are evaluated in a comprehensive and consistent manner, and that proper supervisory attention is focused on those engaging in fiduciary business that are not consistent with sound fiduciary principles,” the BSP said in a statement.
The establishment of the trust rating system came amid expectations of an increase in funds to be managed by trust units.
