Central Bank of the Philippines recalibrates UITF single issuer exposure limits for exchange traded equities

The Central Bank of the Philippines has amended its banking and non-bank rules to recalibrate the maximum exposure limits for Unit Investment Trust Funds (UITFs) to exchange-traded equity securities. A UITF’s combined exposure to any entity remains capped at 15% of the fund’s market value, but UITFs invested partially or substantially in exchange-traded equity securities may now have up to 20% exposure to a single entity or issuer. For equity index-tracking UITFs, the exposure limit is the actual benchmark weighting of the index component issuer, which may exceed 20%. Any exposure above 15% and up to the applicable 20% limit must be solely in the form of exchange-traded equity securities of the same entity or issuer. The amended rule also requires aggregate exposure to an entity and its related parties to be monitored with adequate risk controls in place. If the limit is breached, notice must be given to the Capital Markets and Trust Supervision Department on the next banking or business day, with details of when the breach occurred, its cause, and the actions taken or planned. Breaches caused solely by mark-to-market movements or extraordinary circumstances such as abnormal redemptions must be corrected within 30 days, while all other breaches must be addressed immediately. A follow-up notice is required once full compliance is restored. The circular takes effect 15 calendar days after publication in the Official Gazette or in a newspaper of general circulation.