BSP allows separate single borrower's limit for trust firms

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) has further eased the current limitations on lending for single borrowers by allowing a separate single borrowers limits (SBL) for trust corporations in an effort to boost the funding of major infrastructure projects under the Aquino administration’s public-private partnership (PPP) program.

BSP Deputy Governor Nestor Espenilla Jr. said in an interview with reporters that the new circular would be issued by the BSP allowing banks to spin off their existing trust units into separate entities.

Espenilla pointed out that the trust corporations would have a separate SBL and directors, officers, stockholders, and their related interests (DOSRI) ceilings.

Espenilla added that the approved circular would help deepen the country’s capital market. “This circular is expected to help deepen and make the country’s capital market become active,” he stressed.

A trust corporation is a company engaged in trust and other fiduciary business and investment management activities that would act as trustee or financial consultant, investment adviser or portfolio manager or adminster any trust or hold property in tryist or on deposit for the use and benefit of others.

Last August, the BSP eased the current limitations on lending for single borrowers undertaking major infrastructure projects under the PPP.

The central bank authorized a separate single borrower’s limit of 25 percent. At the moment, the BSP restricts each bank’s exposure to a single borrower to only 25 percent of its capital.

BSP Governor Amando M. Tetangco Jr. said the separate SBL of 25 percent of bank’s equity for lending specifically to PPP projects would only apply for the next three years.

Tetangco pointed out that monetary authorities agreed to issue a separate cap on lending for infrastructure projects to encourage diversified conglomerates to bankroll priority projects of the Aquino administration.

The BSP chief explained that banks that wish to lend to conglomerates undertaking infrastructure projects and avai of the separate SBL would have to present a plan on how to manage their credit risk to the central bank.

Several banks through the Bankers Association of the Philippines (BAP) have held a series of dialogues with the BSP to increase the ceiling to be able to address the borrowing requirements of large companies such as diversified conglomerate San Miguel Corp. and First Pacific’s Metro Pacific Investments Corp. that have ventured into capital intensive tollway business.

The review also take into consideration the increasing number of companies that are tapping the bond market to raise needed equity to bankroll their expansion activities.

Banks earlier asked the BSP to exclude the bonds that they acquire from the SBL computation subject to certain ratios. Banks were allowed a leeway equivalent to only about five percent of their capital for such transaction

Last year, the BSP eased a rule that made it easier for companies bidding for power projects to avail of financing from banks by revising the DOSRI regulations on bank loans to subsidiaries in the energy and power generation sectors.

It issued BSP Circular 654 amending the ceiling on loans, other credit and guarantees to subsidiaries and affiliates of banks/quasi-banks with businesses in energy and power generation by allowing a separate individual limit to loans of banks/quasi-banks.The DOSRI limit is 25 percent of the net worth of the lending bank provided that the unsecured portion would not exceed 12.5 percent.