Banks given more time to reclassify past due loans

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) is giving banks more time to reclassify loans of borrowers in areas affected by the coronavirus disease 2019 or COVID-19 as past due and non-performing.

In a memorandum, BSP Deputy Governor Chuchi Fonacier said the Monetary Board has issued Resolution 570 on April 24 approving the exclusion of loans of borrowers in affected areas from being reclassified as past due and non-performing until end-December next year.

This means loans in COVID-19 affected areas that have been classified as past due and those becoming past due or non-performing six months from March 8 will not be included in the past due and non-performing classification until the end of next year.

As part of the regulatory relief for BSP-supervised financial institutions, the regulator issued Memorandum 2020 – 008 on March 14 allowing banks to exclude loans in affected areas from the past due and non-performing classifications only for one year or until March 8, 2021.

Fonacier said BSP-supervised financial institutions should implement prudent operational control measures as documentary requirements for the restructuring of loans may be waived.

As a general rule, loans, investments, receivables, or any financial asset, including restructured loans, are considered past due when any principal and/or interest or installment due, or portions thereof are not paid at their contractual due date. However, banks may provide a cure period on a credit product-specific basis, not to exceed 30 days to allow borrowers to catch up on their late payment.

On the other hand, loans are considered non-performing if any principal or interest are unpaid for more than 90 days from contractual due date.

Philippine banks have been reporting lower earnings for the first quarter as they opted to allot higher provisioning for loan losses due to the impact of the enhanced community quarantine and business shutdowns, impairing the ability of borrowers to settle their obligations in time.

Meanwhile, the Bankers Association of the Philippines (BAP) yesterday reiterated the commitment of the industry to provide unhampered banking services and ensure the industry’s resiliency amid the extended enhanced community quarantine in Metro Manila and nearby provinces.

“Further to this, the banks have enhanced their operations to adapt to this new normal. The public is likewise reminded to ensure that their information is protected against cybercrime that can proliferate during this time,” the BSP said.