"We can’t, that’s negative. From a prudential standpoint, that is difficult to consider," said BSP Deputy Governor Alberto Reyes.
Reyes said the BSP cannot agree to the proposal to raise the SBL, but added that while current banking laws peg the SBL to 25 percent, the Monetary Board, the policy-making body of the central bank has the discretion to raise this.
Banks want to increase the SBL to allow them to also increase their exposure in several big ticket projects. They said recent mergers among the country’s biggest banks failed to produce higher SBLs for the surviving banks because there was little or no increase in their unimpaired capital.
These mergers include the Metropolitan Bank and Trust Company and Solid Banking Corp., Bank of the Philippine Islands and Far Eastern Banking Corp. and Equitable Banking Corp. and the PCI Bank.
Also, commercial banks whose capital base including unimpaired capital have grown due to increased liquidity from earnings in deposits and investments are interested in a hike in their SBLs.
Other banks are also asking the BSP to exempt government financial institutions from the SBL ruling.
Exempting them, according to bankers, will allow the Development Bank of the Philippines and the Landbank of the Philippines to increase borrowings to banks since they have wholesale lending windows for specific sectors.
These government financial institutions are constant recipients of multilateral creditors such as the World Bank, International Monetary Fund and Asian Development Bank.
Monetary officials said however, increasing the SBL is not palatable at this stage, especially with the increasing levels of non-performing loans (NLPs) in the banking sector.
NPLs have been hovering between 16 percent and 20 percent over the last three months for private commercial and universal banks, while government financial institutions have bad loans of about 17 percent. For thrift banks and savings bank, the NPLs are at 11 to 12 percent. – Rocel Felix