BSP issues new borrowing guidelines for newly merged banks

MANILA, Philippines - Newly merged and consolidated banks applying for loans at the Bangko Sentral ng Pilipinas (BSP) now have clearer guidelines on how much they can borrow.

This was after the central bank issued Circular 776, dated Dec. 7, extending a “temporary line” at its rediscounting facility for merged and consolidated lenders in the process of finalizing documentary requirements with the BSP.

The rediscounting facility allows banks to meet their short-term liquidity requirements by borrowing money from the BSP while using their clients’ promissory notes as collateral. In turn, BSP also encourages banks to lend these borrowed money to end-users. 

“For newly merged or consolidated banks, a temporary line not exceeding 50 percent of its adjusted net worth as of latest date may be granted for a period of 180 days,” the circular stated.

The allowable period, it said, is extendable by another six months or until such time required reports from BSP’s supervision and examination sector department come out, whichever is earlier.

BSP also said at least one of the merging banks must have capital adequacy ratio of at least 10 percent and a rating of three in Camels. Both are measures of financial strength.

BSP Deputy Governor Diwa Guinigundo, in a text message, said before the regulation, computation of how much newly married banks can borrow from BSP “becomes an issue.” This is because current rules do not differ between a regular bank and those banks undergoing merger and consolidation.

Under rediscounting facility regulations, an “applicant bank” may borrow money “equivalent to 50 percent to 200 percent of its adjusted net worth depending on total credit score.”

But since bank mergers may take time to be finalized on paper, there is confusion on what net worth will be used as basis.

Latest BSP data showed the rediscounting facility has been consistently used by lenders for their requirements. Peso rediscounting loans surged 73.2 percent to P43.740 billion as of November.