BPI spins off trust assets into new unit

Ayala-led Bank of the Philippine Islands is set to spin off into a new stand-alone trust corporation over P566 billion worth of assets under management (AUM) by the bank’s trust and fiduciary unit.

In a recent disclosure to the Philippine Stock Exchange, BPI said the Bangko Sentral ng Pilipinas (BSP) had granted the license for the bank’s asset management and trust group to create and operate a new trust corporation.

The new entity will be called BPI Asset Management and Trust Corp. (BPI AMTC), a wholly owned subsidiary of BPI that will start operations on Feb. 1 this year.

Trust corporations are entities authorized by the BSP to manage funds.

Unlike existing trust units of banks and non-bank financial institutions, these entities are organized as a corporation with its own capital and management structure.

They are not subjected to the credit-related controls applicable to bank operations such as the single borrowers’ limit (SBL) and loan accommodations to directors, officers, stockholders and their related interests (DOSRI).

The BSP believes that having an entity primarily performing trust activities separately from the bank was a prudent policy direction.

Mario Miranda, head of BPI’s asset management and trust group, said in a text message that all of BPI’s trust assets would be “migrated to the trust corporation.” He estimated the group’s total AUM as of end-2015 at P566 billion.

Miranda will also be in charge of the new entity BPI AMTC as president.

Based on the disclosure, there will be no change in the existing contracts, processes and investment management/operating teams of assets to be migrated to BPI-AMTC.

For banks, spinning off trust assets into a separate trust corporation is typically beneficial because under this structure, a much smaller AUM level is required to be kept in low-yielding government bonds.

Under the banking structure, 1 percent of AUM must be kept in such low-yielding assets.

Once a bank spins off its trust business, it can no longer run a trust department in the future. However, it can have a stake in multiple trust corporations.