• Banks may sell CIS


    The Monetary Board (MB) of the central bank has approved the use by banks of its premises to market and sell to their clients collective investment schemes (CIS)—products such as mutual funds, unit investment trust funds and variable unit-linked life insurance policies—in line with the liberalization of the banking industry.

    In a statement on Tuesday, the Bangko Sentral ng Pilipinas (BSP) said the approval is a means of advancing the liberalization of the industry’s cross-selling framework. Cross-selling is a market practice where bank premises serve as a distribution channel for financial products other than those of the bank.

    BSP Governor Amando Tetangco, Jr. said the MB’s move provides the investing public with more financial choices but balances this with enhanced consumer protection provisions.

    “This reform initiative provides investors with easier access to varied financial products that can address different investment objectives,” Tetangco said.

    However, he added, “the MB has taken the explicit initiative to align the increased options with full transparency and investor awareness.”

    Previously, the BSP engaged market organizations in outlining its multi-stage reform initiative on cross-selling.

    The central bank said the new approval by the MB comprises phase 2 and expands the products which banks can cross-sell, specifically, CIS products of entities belonging to the same banking group or financial conglomerate as the bank may be cross-sold by the latter.

    In addition, the regulator said traditional protection-type insurance products such as life policies may now be cross-sold by banks even if the insurance product is from an entity that is not within same banking group or financial conglomerate as the bank.

    While phase 2 further liberalizes the products for cross-selling, more stringent disclosure requirements are also being introduced. These new disclosures are in line with the BSP’s drive toward consumer protection and are meant to make potential investors aware of the investment risks, it added.

    The BSP noted that CIS products carry the investment risk of a potential loss of principal and/or the risk of not achieving the targeted rates of return.

    Consistent with prudent practice on investments, a Client Suitability Assessment shall be undertaken prior to the acquisition of the client of a CIS.

    The BSP said there is also the required inclusion of a standard disclosure statement in all investment contracts and marketing materials that the CIS is not a product of the bank.

    And to enforce full transparency, financial product providers are expected to take all reasonable steps to ensure fair dealings with the client, particularly disclosing potential conflicts of interest, where they arise, it said.

    “This latest reform is in line with the BSP’s general intent to liberalize the banking industry while upholding governance responsibilities from stakeholders and introducing consumer protection initiatives, where warranted,” the BSP added.


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    1. This is a momentous step for the retail banking industry. Let’s hope consumers are ready for financial products that can lose as well as gain market value being sold out of bank branches.

      This will also let conglomerates (SM-BDO, Ayala-BPI, etc.) raise quasi-deposit financing for their group companies, as an alternative to bonds, bypassing the BSP’s regulations on bank lending to related parties and the single borrower limit.

      I am not sure about the practical effect of the client suitability assessment or the the disclosure requirements (what size print?) unless BSP fields additional personnel to police these (or outsources).