BSP open to trust units' proposal

By Jun Vallecera
Reporter

THE monetary authorities are receptive to a proposal allowing trust units to invest a portion of the wealth they manage in the overnight market.

Bangko Sentral ng Pilipinas governor Amando Tetangco Jr., who also heads the policy-making monetary board, said late on Tuesday the idea has its attractions.

“We are not closing our doors to the proposal advanced by the TOAP,” Tetangco said of the plan only informally presented to them for approval.

Trust Officers Association of the Philippines or TOAP president Ma. Lourdes de Vera originally raised the matter before deputy BSP governor Nestor Espenilla Jr. in May when the unit investment trust fund (UITF) market was rocked by mass termination of placements.

She was hoping the regulators would look kindly on the proposal seen to expand the areas in which UITFs may invest, and widen its appeal as a lucrative but safe money maker.

“We see operational details needing resolution but without going into that we will study the proposal in detail,” Tetangco said.

UITFs are prohibited from investing even a centavo of the billions they manage in the overnight market where temporarily illiquid banks and financial institutions meet colleagues in surplus and arrange for very short-term borrowings.

Regulations mandate UITFs to invest their money only in tradable securities, which are essentially government debt notes, certain forms of deposits and tradable loans.

These specifications were meant to secure UITFs from reckless money managers whose investment decisions may move markets but could make or break investor futures just as readily.

TOAP chief de Vera earlier said existing regulations limit the permissible areas in only a few places in the vast Philippine financial market such that earnings potentials are limited as well.

Tetangco refused to indicate when the study would likely be completed but he has been one to observe the domestic capital market, where infrastructure builders and money managers meet to match their long-horizon projects with long-term funds, needs more depth.

Overseas money managers often find the domestic capital market too thin or too expensive to be of any effective use.

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