MORNBFI Vol. 1 - Planters Development Bank

APP. Q-4811.12.31BASIC STANDARDS IN THE ADMINISTRATION OF TRUST, OTHER FIDUCIARYAND INVESTMENT MANAGEMENT ACCOUNTS(Appendix to Subsec. 4401Q)I. IntroductionTrust and other fiduciary business andinvestment management activities haveevolved with the changes in the financialmarket and advancement in technology.These innovations have allowed trustentities to expand the scope of trustproducts and services offered to customers,thus increasing their exposure to variousrisks. As trust entities grow more diverse,necessarily policies and procedures as wellas risk management practices must keeppace. The basic standards would providecommon processes for an efficientoperation and administration of trust, otherfiduciary and investment managementactivities across the trust industry.II. Statement of policyIt is the policy of the BSP to provideadequate level of protection to investorswho, under a fiduciary arrangement,engage the services or avail of products oftrust entities which are required to observeprudence in the exercise of their fiduciaryresponsibility. Along this line, the BSPprescribes basic standards for the efficientadministration and operation of trust andother fiduciary business and investmentmanagement activities.III. StandardsThe basic standards in the administrationof trust, other fiduciary and investmentmanagement accounts are meant to addressthe significant areas of operations and provideminimum set of requirements andprocedures:A. Account acceptance and reviewprocesses1. Pre-acceptance account reviewThis review must document that thetrust entity (TE) can effectively administerthe account. It shall be covered by a writtenpolicy which shall contain, among otherthings, the types of trust, other fiduciary andinvestment management accounts that aredesirable and consistent with the TE’s riskstrategies and the specific conditions foraccepting new accounts, and approved bythe Trust Committee, or the Trust Officer,or subordinate officer of the trustdepartment, authorized by the board ofdirectors or its functional oversightequivalent, in the case of foreign banks andinstitutions.The review process entails thethorough and complete review of theclient’s/account’s characteristics andinvestment profile, including the assets/properties to be contributed/delivered.Non-financial/non-traditional assets (i.e.,real estate and the like) which are morelikely to be iliquid shall be carefullyreviewed prior to acceptance to ensure thatthe TE only accepts accounts which holdassets it may be able to properly manage.Prior to the acceptance of a fiduciaryaccount, the TE shall review the underlyinginstrument (trust agreement or contract)for potential conflicts of interest. If suchconflict exists, the TE shall takeappropriate action to address suchcondition before the account is accepted.In cases where the TE is chosen as asuccessor trustee or investment manager,the TE shall perform a review andevaluation of all assets to be delivered tothe TE to determine how these would servethe client's objectives, whether the TE canproperly handle such assets and to assessany possible issue/problem which mayarise with respect to such assets beforeacceptance of such assets and/orassumption of the trust, fiduciary orinvestment management relationship.Manual of Regulations for Non-Bank Financial Institutions App. Q-48 - Page 1