BSP extends regulatory relief to foreign bank branches
The branches of foreign banks in the Philippines can continue to use twice the level of net worth for its single borrower’s limit (SBL) until end-2021 as part of the Bangko Sentral ng Pilipinas’s (BSP) regulatory relief measures.
BSP Governor Benjamin E. Diokno said extending the period by another year will “help boost lending in support of businesses and sectors, and pump prime the country’s economic growth and post-pandemic recovery.”
“Additionally, this will diversify credit exposures, particularly in financing big ticket projects, that otherwise will be concentrated to domestic banks,” said Diokno in a statement.
The extension will allow the 14 foreign bank branches existing prior to Republic Act No. 10641 or the law that expanded foreign bank entry in the Philippines, to finance big infrastructure projects such as those listed under the government’s “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.
The regulatory relief is basically the non-imposition of sanctions prescribed under existing regulations for the SBL breach until December 31, 2021.
“The regulatory relief was extended in view of the lapse of the transitory period for the SBL computation on December 31, 2020 implementing RA No. 10641,” said BSP. “As a control measure, new loans, credit accommodations or guarantees extended and existing credit exposures which are restructured, renewed, and refinanced, beginning January 1, 2021 until December 31, 2021, shall not exceed the prescribed percentage limit using as reference point twice the level of capital or net worth of a foreign bank branch.”
“The total amount of loans, credit accommodations and guarantees that may be extended by a bank to any borrower shall be subject to a cap of 25 percent of the net worth of such bank,” added the BSP. The percentage limit has been temporarily increased from 25 percent to 30 percent until March 31, 2021 as part of the operational relief measures.
Based on BSP Circular No. 1073 issued last February 10, existing foreign bank branches have until December 31, 2020 to use twice the level of capital or net worth, as reference point for purposes of determining the appropriate SBL. This is now extended to end-2021.