BSP Releases Trust Rating Guidelines

Article excerpt

The Bangko Sentral ng Pilipinas (BSP) has released the revised trust rating system that will "comprehensively and uniformly" examine and evaluate the fiduciary business and transactions of all banks' trust units.

In a memo detailing the guidelines for the revised trust rating system to be adopted on July 1, BSP Governor Amando M. Tetangco Jr. said the more effective risk-focused monitoring of trust entities has been crafted to make it more responsive to the growing P3-trillion trust assets of the country's 37 large banks.

"The trust rating system takes into consideration key factors that are essential in the operations of a trust entity and (moreover) it evaluates trust entities' risk management practices and capability to handle relevant exposures in its fiduciary dealings," said Tetangco.

Based on the 38-page guidelines' overview, the fiduciary activities of trust entities are assigned a composite rating based on the evaluation and assessment of five essential components.

The first two components are the capability of the board of directors, trust committee and senior manage-

ment responsible in the administration of fiduciary businesses, and the soundness of operations, controls and edits. The three other components are: adequacy of compliance with governing instruments (including applicable laws and rules and regulations), prudent management of fiduciary assets and lastly, the earnings performance.

The revised rating system has shifted to a 4-point rating scale from a 5-point rating and adopted new regulatory issuances, the integration of risk management framework and enforcement rules.

The new rating system which amended the five-year old system was approved last May 23 pending issuance of the guidelines. …