Lectures &

News & Views

Law &



Trust Products
& Practice

About the Guru


Email Feedback

Guest Register










The Stand-Alone Trust Corporation:
A new kid comes to town

(Article published in the Feb 23,2011 issue of Manila Standard Today)  

The Monetary Board’s passage on 06 January 2011 of its Resolution No. 26 and the resolution’s implementation by Bangko Sentral Governor Amando M. Tetangco’s issuance on 19 January 2011 of Circular No. 710 series of 2011 constitute game-changer in the field of trust business in the Philippines.  The circular authorizes any stock corporation, possessing all the qualifications and none of the disqualifications, to form and operate, with prior special permission from the BSP, a “stand-alone trust corporation”.

Heretofore, in the Philippines and elsewhere, the trust, as a business has been a monopoly of banks.  Starting however on 11 February 2011, when Circular No. 710 took effect, that monopoly has become a thing of the past for us Filipinos.  Non-banks, notably financial institutions, now limited to various degrees of involvement in asset management, have the ability to become full players in the field. 

This recent liberalization of the trust industry took a long time in coming, at least in the Philippines.  Trust began, in its western birthplace, as an arrangement entered into with an individual.  A member of the landed gentry who wanted to enjoy certain political liberties, particularly speaking publicly against the sovereign, sought to insulate his wealth, primarily in the form of land, from confiscation by transferring legal title to another individual but at the same time imposing on that individual certain duties, benefiting the transferor.  Similarly, a debtor who did not wish to have his landholdings foreclosed by his creditors made it appear that the properties were not owned by him, the debtor, but by somebody else with whom the creditor has had no direct dealings. 


The transferee (who was eventually called “trustee”) was in law deemed the absolute owner but was in conscience obligated to devote the property not for himself but for the transferor and whoever the transferor many name in his stead.  Crucial to the integrity of this relationship is thus the conscience of the trustee who welcomed their functions without pay. 

As the economy developed, duties of the trustees became more and more complicated and thus more demanding of the trustees time and talent.  In fairness, the trustee, though still acting in conscience, soon was permitted to accept reasonable compensation for doing his functions.   

When the idea of trust got implanted in American soil, trusteeship was transformed from an individual’s craft into a legitimate activity of entities which called corporations which under the law were conceived as separate and distinct from their owners.  Trust activity, which used to be dependent on good conscience, became a matter of good management by a juridical entity which had no conscience to speak of.

Of the many creatures living in the corporate forest, banks were the entities most suited to perform the function expected of the trustees.  They had the ability to affect the payment of monies to various persons at various times.  Their competence in making the money they borrow from their clients grow was easily transferable to the money of other people who did not lend but simply hired them as managers.

Very soon the people who merely had their money administered them money wanted a bigger share of the returns from the enterprises their funds were invested in.  After all, they bore the risk of loss.  Before long, it became acceptable practice for banks to play two roles:  first, to manage their own money, consisting of capital and borrowed funds, and second, to manage money that belonged to others.

The inflow of profits received by the banks’ clients who had entrusted their money to the banks predisposed the said clients to overlook the fact that soul-less entities called banks were performing functions that were, in ages past, justified on the possession of a good conscience by the managers.  Public tolerance of the idea that the craft of a trustee can be engaged in by a bank that did not have a conscience, easily led to the acceptance of the notion that soul-less entities may with equal efficiency and effectivity perform the tasks that a bank does for the money of depositors. 

In other words, proof that an entity had the ability to manage another’s money was no longer dependent on proving one’s the ability to manage one’s own money well.  What because of crucial importance is the ability to manage money per se, and not whose money it is that the entity is managing.  A entity that has the capability to manage money properly need not, for the purpose of convincing other people to avail themselves of that capability, be shown to be good in managing its own money. 

Circular No. 710, on the stand-alone trust corporation, now formalizes the recognition of this reality and throws wide open the trust field to all the varieties of money managers.  Initially, there may be, as may be expected in cases of drastic reforms, some confusion in the mind of the investing public as well as uncertainty in the first entrance steps of those who are just now stepping into the trust playing field.  Eventually, however, as the expanded number of players get their bearings and as the users of their services acquire more sophistication, the trust industry will sooner rather than later settle down, to the greater benefit of consumers of trust products.