PNB head says banks need regulatory relief

MANILA, Philippines - Philippine National Bank president Omar Byron Mier said the Bangko Sentral ng Pilipinas (BSP) should give banks some regulatory relief while the world economy is in recession.

Mier said yesterday that banks are already under stress from the slowdown in economic activities and the extraordinary conditions brought about by what experts believed was a global depression.

According to Mier, PNB has made representations before the BSP for certain regulatory relief, beginning with the possible suspension of the mark-to-market rule and the elimination of the two percent loan loss provision.

Mier said the PNB also has a pending request before the BSP asking for the deferment of a rule that would require banks to demand audited financial statements from their borrowers.

As early as November last year, the BSP has already ruled out the possibility of a blanket suspension of the mark-to-market rule but Mier said bank regulators should review current conditions and reconsider it.

Mier said the loan loss provisioning requirement, on the other hand, could be eliminated since it was imposed only when the industry was burdened with huge non-performing loans (NPL) after the 1997 financial crisis.

According to Mier, the conditions have changed significantly since then, with the average industry NPL ratio now below five percent-dropping back to pre-1997 levels.

But Mier said that aside from the regulatory relief related to softening the impact of the current crisis on the balance sheet of banks, the BSP should also consider other regulatory relief that would directly impact borrowers.

Mier said PNB’s request to be allowed to accept unaudited financial statements from borrowers until 2012 stemmed from the fact that there are very few accredited auditors that could be used in areas outside the capital.