BSP amenable to extending higher SBL

Published October 7, 2021, 4:31 PM

by Lee C. Chipongian

Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said they could extend the higher single borrower’s limit (SBL) of 30 percent after the relief measure expires end-2021 to encourage more bank lending such as for project finance to support the recovery.

BSP Governor Benjamin E. Diokno

“The BSP is open to extending the 30 percent SBL to support the country’s recovery for as long as this will not pose a threat to the stability of the financial system,” said Diokno during his weekly online press briefing on Thursday, Oct. 7.

Pre-pandemic, SBL was at 25 percent of a BSP-supervised financial institution’s (BSFIs) capital. From time to time, the BSP increases the SBL cap or grants separate SBL but as a general rule, banks and non-banks should spread their risks.

“The retention of BSP’s regulatory measures including the 30 percent SBL will depend on our assessment of economic developments and financial conditions,” Diokno also said.

On March 31 last year, when the COVID-19 pandemic was at its early months, the BSP raised the SBL from 25 percent to 30 percent as an additional operational relief measure. The higher SBL has been extended for a third time since then.

Banks may apply the separate SBL for project finance exposures, including those to water concessionaires, subject to compliance with certain conditions.

“The adoption by the BSP of a separate SBL for project finance aims to mobilize private sector funding toward projects that support the country’s economic recovery efforts and nation building,” said Diokno.

Bank lending has shown signs of gradual improvement. After eight months of contraction, big banks’ outstanding loans grew by 1.3 percent year-on-year in August.

“We’re cautiously optimistic that with the gradual easing of lockdown measures, combined with the implementation of localized lockdowns, and the acceleration of the vaccination rollout, business activity will pick up which would then spur credit growth in the country,” said Diokno.

As of end-August, the banking system’s gross total loans increased by 1.4 percent year-on-year growth to P10.9 trillion, he noted. “While the contraction in bank lending is both a supply and demand issue, the BSP relief measures which include the increase in the SBL aim to address issues related to the supply side of lending. As economic conditions improve, the BSP’s regulatory flexibilities will allow banks to lend more to productive enterprises and priority projects,” said Diokno.

Project finance is a method of funding in which the lender looks primarily to the revenues generated by a single project, both as a source of repayment and as security for the exposure. These project finance projects are the government’s priority programs such as water supply, wastewater, and sanitation services.

 
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