Banking units of conglomerates face tighter supervision

MANILA, Philippines—The Bangko Sentral ng Pilipinas, with inputs from other financial regulators, is set to strengthen supervision of banks belonging to conglomerates, noting the capital risk that may be posed by the affiliates on these banks.

In its latest Report on the Philippine Financial System, the BSP cited proposals from the international community for regulators to keep a closer eye on banks owned by conglomerates given that the recent global crisis was aggravated partly by ties of Western banks to other related enterprises.

The BSP said it would continue to adopt international standards on regulation, especially those that are appropriate for the Philippines.

To improve regulation of Philippine banks that belong to conglomerates, the BSP said it has to intensify cooperation with other financial regulators such as the Securities and Exchange Commission and the Insurance Commission.

The BSP said enhanced regulations for such type of banks were being prepared with the help of the two other regulators. The BSP, the SEC and the IC together form the Financial Sector Forum (FSF), which formalized their regulatory cooperation.

“FSF is bulking up its regulatory muscle for the effective supervision of financial conglomerates and prevent double-leveraging of capital as seen in many other jurisdictions dealing with financial conglomerates,” the central bank said.

The BSP said one of the supervisory strategies to be implemented was the establishment and periodic updating of “conglomerate maps” that would identify all affiliates of banks and show how all of them were performing financially.

Intensified information sharing among the regulators was a requirement for the regular updating of the conglomerate maps, the BSP said.