Question & AnswerQ&A (BSP CIRCULAR NO. 844)
Cross-selling means the presentation and/or sale of a financial product, other than the bank's own financial product, to a bank client inside bank premises through written or verbal communications.
A financial conglomerate refers to a group of interrelated entities providing significant services in at least two different financial sectors such as banking, securities, and insurance. A banking group is considered a part of a financial conglomerate.
Collective investment schemes of financial product providers belonging to the same financial conglomerate, specifically mutual funds registered with the SEC, Unit Investment Trust Funds (UITFs) authorized by the BSP, and Variable Unit-Linked life insurance policies (VULs) governed by the Insurance Code or IC rules, may be cross-sold inside bank premises.
Banks must ensure that financial product providers follow enhanced consumer protection standards, including providing a Product Highlight Sheet to clients, conducting a Client Suitability Assessment, generating an Investment Policy Statement, disclosing conflicts of interest, and including a standard disclosure statement on product materials.
The statement reads: 'This is not a deposit product. Earnings are not assured and principal amount invested is exposed to risk of loss. This product cannot be sold to you unless its benefits and risks have been thoroughly explained. If you do not fully understand this product, do not purchase or invest in it.' This must be in bold and minimum font size 12 on the front cover of any material used for cross-selling.
The Monetary Board must approve the bank’s cross-selling activities. Banks must have a CAMELS composite rating of at least '3' or its equivalent and must submit an application letter signed by the President or Country Officer along with notarized board resolutions and certifications on compliance with banking laws.
The board must oversee the implementation of policies relating to cross-selling, ensure due diligence on financial products and providers, maintain a formal written policy for product suitability assessment, uphold customers' rights, have complaint mechanisms in place, and periodically review all cross-selling arrangements reporting results to the board.
Bank employees not specifically trained and qualified are limited to referring clients to representatives of financial product providers. There must be clear distinctions between bank employees and financial product representatives, with CIS sales conducted in separate areas from bank products.
Violations may result in monetary penalties not exceeding P30,000 per day for each violation until corrected and/or non-monetary sanctions deemed appropriate by the Monetary Board depending on the gravity of the offense.
Within 30 days from effectivity, the bank must review all existing cross-selling arrangements for compliance with the revised rules, report any deviations to the BSP, and if fully compliant, issue a certification of compliance to the BSP.