Monetary Board relaxes rules on trust accounts

Banks' trust departments may now invest the money of their wealthy clients in foreign currency-denominated products, giving these clients more investment options. In a briefing with reporters on Friday night, central bank Governor Amando M. Tetangco, Jr. said the Monetary Board would now allow individual investors maintaining trust accounts in banks to put in as much as $30 million each in foreign currency-denominated investment vehicles. "For example, you have a trust account or an investment management account (IMA)... At present, you can invest only in peso-denominated products," he said. "With this [move] you can invest in products denominated in other currencies. This would give owners of trust accounts or IMAs investment alternatives," he added. Individuals or corporations may open investment management accounts in banks, telling the banks’ trust officers how their money should be handled. Investment management accounts differ from unit investment trust funds or UITFs, which pools money from several individuals and places these in a variety of investment vehicles depending on the investment horizon or their risk appetite. "[Dollars] to be invested by Philippine residents and purchased from banking system shall not exceed $30 million per investor per year or per fund per year for qualified investors... If they want a higher limit they have to come to the BSP for approval," Tetangco added. Tetangco said the rules will take effect 15 days after the central bank circular is published. In a telephone interview yesterday, Raul C. Diaz, trust officer of the Philippine Bank of Communications, welcomed the development but said he does not see investors making the shift right away. "There is interest but whether there would be substantial demand remains to be seen. Maybe in the long run, there will be more demand. But given the present situation and with [the recent credit crisis in] Dubai, there might not be much [right away]," he said. Diaz also expects trust departments to be prudent in managing such investments, with more than half of managed funds likely to be channeled to sovereign debt issues. In April, Diaz who was then president of the Trust Officers Association of the Philippines, asked the BSP to allow local institutions handling IMAs to invest in foreign currency-denominated instruments because they were losing potential clients to foreign companies. As of September, the total assets of trust and other fiduciary business and investment management activities reached P1.72 trillion, of which P800 billion was placed in IMAs. — Don Gil K. Carreon, BusinessWorld