BSP requires banks to create broker customer account

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BANKS are now required to segregate clients’ funds from the lenders’ assets by introducing “broker customer account,” according to the central bank.

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New guidelines approved by the Monetary Board (MB) of the Bangko Sentral ng Pilipinas (BSP) require the segregation of customers’ funds received by banks under a securities brokering arrangement from the deposit-taking activities of these banks.

“The segregation is undertaken by introducing a new account in the books of the banks which are called ‘broker customer account,’” the central bank said in a statement on Tuesday.

The BSP explained the before the new guidelines, banks would book as deposits the money for buying securities that they received from clients. The bank is a securities broker for the client under this transaction.

Securities brokering is performed when a bank—specifically licensed as a broker—facilitates the buying and selling of financial securities between a buyer and a seller. In this capacity, the bank is acting as an agent of the customer rather than a receiver of funds for the purpose of deposit taking, according to the BSP.

“The ‘broker customer account’ makes clear that funds recorded under this item are not to be classified as ‘deposits.’ They are transactional in nature because there is an instruction to use them to purchase securities,” the central bank said.

In this context, the “broker customer account” will not be subject to bank reserve requirements and will not be covered by the Philippine Deposit Insurance Corporation, it added.

In addition, the BSP said the guidelines also requires broker banks to submit a monthly report of their weekly balances of securities and cash that they received from their customers starting October 2015.

The central bank stressed that the guidelines are consistent with its thrust of aligning the reporting system with international standards and to protect the welfare of financial consumers.

“As a step towards the segregation of banking activities from other business activities, the current Financial Reporting Package of the BSP was also amended to make room for the reporting of the extent of securities brokering transactions of its supervised financial institutions,” it said.

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