BSP not keen on extending sp'l loan limit for oil firms

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) is not keen on extending a special loan limit for oil firms instituted two years ago once it expires early next year, an official said.

“We are not thinking about it. I am not aware of any request actually,” BSP Deputy Governor Nestor Espenilla Jr. told The STAR in a text message last Sunday.

He was pertaining to the additional special borrower’s limit (SBL) of 15 percent for exposures of banks to oil companies granted by BSP in 2011. The regulation, which was on top of the regular 25-percent SBL, was meant to finance oil importations by local players.

It was granted upon request and is scheduled to expire by January 2013.

Representatives of major oil players could not be reached for comment as of press time.

SBL is a mechanism meant to make sure that banks do not concentrate lending too much on one segment of the economy as this may promote bad loans. In announcing the approved measure then, BSP cited the “need to ensure adequate supply of oil and other petroleum products in the country.”

Oil prices in the world market have stabilized in 2010, ending that year at about $90 a barrel from its $130 peak during the global financial crisis in 2008. But in 2011, oil prices have begun to shot up again as the crisis in the Middle East spurred fear of oil supply shocks.

Sought for comment, Victor Abola, economist at the University of Asia and the Pacific, said there is really no need to renew the separate SBL.

“Firms can always issue bonds or issue shares, as required by law, for funding,” Abola said in a phone interview.

When BSP announced the regulation two years ago, it encouraged local oil companies to “gradually resort to the capital markets for their funding needs.”

“For banks, this means that they will have to look for other borrowers. This is simply BSP saying they have to expand their lending base,” Abola added.

Outstanding loans, net of banks’ placements in BSP, rose 16 percent as of July to P2.977 trillion, data showed. BSP is encouraging banks to lend with an end in view it will boost consumption spending and thus, growth.