BSP eases rules for securities custodianship and registry operations

Bangko Sentral ng Philipinas Governor Benjamin Diokno.   EDWIN BACASMAS

The central bank wants to encourage the creation of companies engaged in securities custodianship and registry services, which are key components of the capital market operations of a financial system.

As such, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said the policy making Monetary Board has approved amendments to the regulations governing these firms to simplify the licensing process and expand both the client base and the number of financial institutions offering these services.

These amendments are part of the commitment of the agency to contribute to the development of the domestic capital market and strengthen investor protection.

Investment opportunities

“The new rules will attract more players in the industry while ensuring that only BSP-supervised financial institutions with robust risk management and governance systems as well as appropriate information technology infrastructure will offer securities custodianship and securities registry services,” Diokno said. “This will complement existing initiatives to expand investment opportunities for the public and at the same time ensure that their interests are adequately protected.”

The enhanced rules require financial institutions that intend to engage in securities custodianship and securities registry operations to only notify the BSP of their intention to engage in said activities and to submit a certification of compliance with the prudential criteria and prequalification requirements set out.

The prequalification requirements emphasize the importance of the independence of the securities custodianship operations from the securities underwriting, dealing or brokering operations of the financial institutions. The requirements likewise include having robust information technology infrastructure to support securities custodian and registry operations.

The amended regulations also allow financial institutions to perform securities custodianship or registry services for a related party provided that appropriate safeguards and controls on related party transactions are adopted to prevent conflict of interest on the said arrangement.

The amended rules provide an option for a securities seller to perform self-managed securities custodianship arrangement where securities sold to or managed on behalf of a financial institution’s clients to be maintained under its own unit performing securities custodian services, subject to compliance with the minimum prudential controls. INQ