By LEE C. CHIPONGIAN
The Bangko Sentral ng Pilipinas (BSP) has extended foreign banks’ larger single borrower’s limit (SBL) to provide more financing resources for the government’s infra-related and development projects.
In a statement over the weekend, the BSP said the Monetary Board has extended the transitory period that will allow foreign bank branches “to use twice the level of net worth as basis for determining the SBL” until December 31 of this year.
According to the BSP, foreign bank branches existing prior to Republic Act (RA) No. 10641 (“An Act Allowing the Full Entry of Foreign Banks in the Philippines”) will be able to “continue supporting the public sector’s initiatives” particularly those identified under the “Build, Build, Build” program.
“The extended transitory period will also provide the foreign bank branches with ample time to re-assess their credit exposures and implement measures to ensure compliance with the SBL regulations even with the reduced base amount starting January 1, 2021,” the BSP added.
The capital composition of foreign banks were amended by RA No. 10641 and excludes “Net Due to Head Office/Branches/Agencies Abroad” account to align with the minimum capital requirement for domestic banks of the same category.
“The said account previously formed part of adjusted capital where prudential and/or regulatory limits, including the SBL, are anchored,” said the BSP.
Since 2014 when the foreign bank entry law was expanded, the BSP has approved 12 more foreign banks. At the end of 2019, there are 29 foreign banks operating in the country.
The SBL limits lending of a bank to a single client to only 25 percent of their capital. By capping lending to a single client, the potential loss of a bank from that particular’s client failure will be limited and risks will be spread.
This is not the first time that the BSP has granted a separate SBL for infra-related projects. From 2010 until 2016, it has given an additional SBL for banks and quasi-banks involved in the Aquino government’s public-private partnership or PPP projects.