NextGen Day

In the second quarter of 2022, an inter-agency cross-sectoral supervisory college for financial conglomerates will begin its experimental run, as regulators seek to improve collaboration and match supervisory techniques with international norms.

Governor Benjamin Diokno of the Bangko Sentral ng Pilipinas (BSP) stated financial conglomerates account for about 60% of the domestic financial system in a virtual briefing on Thursday.

“Given these bodies’ systemic importance, FSF (Financial Sector Forum) members saw the need to improve oversight in order to more effectively perform their mandates under their separate charters,” he said.

According to Diokno, members of the FSF signed a memorandum of understanding (MOU) on January 25 to create the Supervisory College for Financial Conglomerate Supervision.

The supervisory college, he said, will provide a venue for regulators to “address developing significant risk issues, conduct impact analyses of conglomerate risks, and develop a supervisory plan.”

The MOU will aid authorities in “mitigating not only hazards within the conglomerate but also intra-conglomerate risks,” according to Diokno.

“By ring-fencing financial conglomerates, we maintain financial stability.” Finally, the real economic benefits from financial sector stability, and vice versa,” he concluded.

According to Diokno, the supervisory college aims to bring the country’s standards on principles for the supervision of financial conglomerates, which are published by the Basel Committee on Banking Supervision; principles for cooperation in regulation, which are published by the International Organization of Securities Commission; and principles of group-wide supervision, which are published by the International Association of Insurance Supervisors, to an international level.

The BSP, the Insurance Commission (IC), the Philippine Deposit Insurance Corporation (PDIC), and the Securities and Exchange Commission (SEC) make up the Financial Stability Forum (FSF) (SEC).

The supervisory college, according to Diokno, will explore a micro prudential approach to risks and how to resolve them.

He stated the BSP, IC, SEC, PDIC, and Department of Finance (DOF) will use a macroprudential approach to address risks and contagion among different financial markets, as well as the financial and real sectors.

“As a result, the supervisory college may raise financial stability issues at the FSCC,” he added.

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