The Bangko Sentral ng Pilipinas (BSP) recently issued new guidelines on the handling of customer funds under a securities brokering arrangement.
On Tuesday the central bank announced the policy-making Monetary Board approved the new guidelines in properly naming and segregating client’s assets from bank assets.
Under the new issuance, banks are now required to declare which money they receive from clients who wish to purchase securities, and set them apart from the reportage on deposits.
“Under the prior practice, banks would book as deposits the money they receive from clients who wish to purchase securities. The bank is acting as a securities broker for the client under this transaction,” the central bank said. “The segregation is undertaken by introducing a new account in the books of the banks which are called ‘broker customer account,’” the BSP added.
Securities brokering is the practice of buying and selling of financial securities between a buyer and a seller. In this practice, the bank is acting as an agent of the customer.
“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.
The BSP added that 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 Corp.
The Monetary Board also required broker banks to submit a monthly report of their weekly balances of securities and cash that they received from their customers.
The reportage requirement starts on October this year.
“The guidelines are consistent with the thrust of the BSP to align the reporting system with international standards and to protect the welfare of financial consumers,” the BSP said.