BSP extends bank relief measures

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) has extended the effectivity of higher single borrower’s limit (SBL) of 30 percent and other regulatory relief measures for banks until end- March next year amid the economic fallout from the global health crisis.

BSP Deputy Governor Chuchi Fonacier said the BSP has approved the effectivity of the operational relief measures for BSP-supervised financial institutions until March 31 next year.

“The measures ease certain BSP regulatory requirements governing banking operations. The period of eligibility may be extended depending on the developments related to the COVID-19 situation,” Fonacier said.

Last March 11, the BSP issued Memorandum  2020 – 011 raising the SBL to 30 percent   to allow banks to lend more to borrowers affected by measures which were  imposed by the government to limit the  spread of  the virus.

The temporary increase in the SBL was supposed to be in place only for six months as part of additional relief for banks to help them survive the unprecedented and uncertain situation and support their subsequent recovery efforts.

The SBL prevents an overconcentration of credit risk and imposes a ceiling on the amount of loans, credit accommodations and guarantees, which a bank or financial institution can extend to a single borrower or its related entities.

The BSP has given foreign banks one more year or until the end of December this year  to extend more loans to crucial infrastructure projects under the Duterte administration’s Build Build Build program.

The extended transitory period provides foreign bank branches with ample time to reassess their credit exposures and implement measures to ensure compliance with the SBL regulations even with the reduced base amount starting January next year.

Under Section 5 of the new law that amended Republic Act 7721, the SBL of a foreign bank branch should be aligned with that of a domestic bank or at 25 percent of a bank’s net worth.

However under RA 10641 which allows the full entry of foreign banks in the Philippines, the regulatory capital composition of a foreign bank branch now excludes “net due to head office/ branches/ agencies abroad” account to align with the minimum capital requirement for domestic banks of the same category.