Donors urged to enhance presence in Phl banks

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) is urging multilateral financial institutions to enhance their presence in Philippine banks by exempting bank directors from these agencies from a loan limit applicable to other stockholders.

Circular 785, issued last Jan. 25, effectively allowed banks to extend more loans and guarantees to their directors, officers and stockholders who represent investing donor institutions such as the Asian Development Bank and the World Bank.

Previously, loans and guarantees were subject to a limit of up to 30 percent of total credit granted by their respective banks. The new order will take effect 15 days after publication.

 â€œThe new circular is geared towards facilitating and encouraging the equity investing, lending and guarantee activities of multilateral financial institutions in the Philippines,” BSP Deputy Governor Nestor Espenilla Jr. said in a text message.

At present, the International Finance Corp. (IFC), the private sector arm of the World Bank, has considerable investment in local banks. The IFC owned shares in BDO Unibank Inc., Planters Development Bank and the Rizal Commercial Banking Corp. (RCBC).

IFC owned $170 million in equity at BDO, the country’s largest in terms of assets, while also holding $50-million worth of shares, equivalent to 6.7 percent of total stocks, at RCBC. In 2000, IFC also invested P1-billion worth of equity, loans and grants to Plantersbank.

The circular aims to encourage more investment, Espenilla said, as this will strengthen local banks’ capital position which, in turn, will allow them to extend more loans to consumers.

More bank loans would mean stronger consumption and investment that should support economic growth, he added.

In the same way, exempting bank directors from these organizations will free up more resources to finance “country-assistance programs” and allow the guarantee of “some desirable bank lending activities.”

IFC, for instance, has a billion-peso Sustainable Energy Finance program with BDO and three other banks namely the Bank of the Philippine Islands (BPI), China Banking Corp. and BPI Globe BanKO.