Off-balance sheet activities of commercial banks in the Philippines

Abstract

This paper is an attempt to shed some light on the major OBS activities of commercial banks in the Philippines. Due to data limitations, the paper focuses on the trust and funds management accounts which have grown most rapidly in recent years, although a brief discussion on trade-related OBS activities is presented in Part II. The implications of the fiduciary facilities on several areas are studied in Part III: First, their possible effect on the solvency and liquidity risks Of banks are looked into. Second, their effect on the structure of the banking industry is studied. Since these are in essence alternatives to the traditional deposits and deposit substitutes in raising funds from surplus units, a competitive structure would be preferred to a set-up where only a few banks dominate. Evidence on this, however, show the opposite. The trust industry is less competitive than the commercial banking industry itself or the industry structure based on balance sheet operations which is already suspected of being oligopolistic (Tan 1989).