DOSRI exemption sought for unsecured loans of government firms
September 11, 2006 | 12:00am
Government financial institutions want the Bangko Sentral ng Pilipinas (BSP) to exempt unsecured loans to government corporations from its restrictions on DOSRI loans.
Bank loans to directors, officers, stakeholders and other related interests or DOSRI are limited by the BSP essentially to prevent these interests from abusing their privileges and running their own banks to the ground.
Government banks, however, have already been exempted by the BSP from some of the provisions of its DOSRI rules since government loans from GFIs carry the sovereign guarantee of the republic and are considered to have zero risk.
However, BSP sources said GFIs want the exemption to widen further by exempting unsecured loans to government owned and controlled corporations or GOCCs from the cap on DOSRI loans.
The proposal was being pushed by the Land Bank of the Philippines and the Development Bank of the Philippines after the BSP granted them exemption from the DOSRI rules earlier this year.
Last February, the BSP eased its rules on government borrowings classifying such loans as non-risk and not subject to any ceiling.
According to the BSP, the new DOSRI rules would provide that loans, other credit accommodations and guarantees to the National Government (NG), its departments, agencies and bureaus including the BSP, would be considered "non-risk and not subject to any ceiling."
However, the BSP said borrowings of government-owned and controlled corporations (GOCCs) would be considered indirect borrowings of the NG and would thus be subject to the usual DOSRI ceilings.
The BSP said also covered by the DOSRI ceilings are corporations where the NG and its departments, agencies, bureaus and other GOCCs own at least 20 percent of the capital stock.
"Moreover, borrowings of local government units from GFIs shall not be considered DOSRI credit accommodations," the BSP said.
BSP sources said the initial exemptions granted to government loans in GFIs were acceptable but exempting loans to GOCCs was another matter altogether.
"All GOCCs are not created equal," said one source. "What if the GOCC is not viable? Exempting unsecured loans to GOCCs from the DOSRI rules would be very different."
According to the BSP, the amendments to the DOSRI rules were proposed amid concerns raised about existing DOSRI limits that tended to restrict borrowings of the NG, its departments, agencies and bureaus as well as GOCCs in GFIs.
Bank loans to directors, officers, stakeholders and other related interests or DOSRI are limited by the BSP essentially to prevent these interests from abusing their privileges and running their own banks to the ground.
Government banks, however, have already been exempted by the BSP from some of the provisions of its DOSRI rules since government loans from GFIs carry the sovereign guarantee of the republic and are considered to have zero risk.
However, BSP sources said GFIs want the exemption to widen further by exempting unsecured loans to government owned and controlled corporations or GOCCs from the cap on DOSRI loans.
The proposal was being pushed by the Land Bank of the Philippines and the Development Bank of the Philippines after the BSP granted them exemption from the DOSRI rules earlier this year.
Last February, the BSP eased its rules on government borrowings classifying such loans as non-risk and not subject to any ceiling.
According to the BSP, the new DOSRI rules would provide that loans, other credit accommodations and guarantees to the National Government (NG), its departments, agencies and bureaus including the BSP, would be considered "non-risk and not subject to any ceiling."
However, the BSP said borrowings of government-owned and controlled corporations (GOCCs) would be considered indirect borrowings of the NG and would thus be subject to the usual DOSRI ceilings.
The BSP said also covered by the DOSRI ceilings are corporations where the NG and its departments, agencies, bureaus and other GOCCs own at least 20 percent of the capital stock.
"Moreover, borrowings of local government units from GFIs shall not be considered DOSRI credit accommodations," the BSP said.
BSP sources said the initial exemptions granted to government loans in GFIs were acceptable but exempting loans to GOCCs was another matter altogether.
"All GOCCs are not created equal," said one source. "What if the GOCC is not viable? Exempting unsecured loans to GOCCs from the DOSRI rules would be very different."
According to the BSP, the amendments to the DOSRI rules were proposed amid concerns raised about existing DOSRI limits that tended to restrict borrowings of the NG, its departments, agencies and bureaus as well as GOCCs in GFIs.
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