Not a single bank applied for financial assistance since the pandemic began in 2020, according to the central bank’s highest-ranking official.

“No bank needed financial assistance,” Bangko Sentral ng Pilipinas (BSP) Governor Felipe M. Medalla told Manila Bulletin.

Medalla is referring to all banks -- the big banks or the universal and commercial banks, the medium-sized thrift banks, and the small rural banks supervised by the BSP.

He said banks remain adequately well-capitalized with enough liquidity and buffers even as non-performing loans (NPLs) and non-performing assets (NPAs) rose in the last two years. NPLs are unpaid loans for more than 30 days while NPAs are loans in default.

The BSP has remedial measures to help solvent banks resolve temporary liquidity problems from “causes beyond their control” such as the pandemic. It extends fully-secured emergency loans to banks as financial assistance.

Medalla confirmed that no bank has approached the BSP for financial support because of the public health crisis and its resulting mobility restrictions which impacted on borrowers’ capacity to pay loans.

During the lockdowns, especially in 2020 and the middle part of 2021, business operations were stalled and jobs were lost. Banks had limited activities but it was business as usual for majority of financial institutions via digital means.

“Universal and commercial banks have more than adequate capitalization,” said Medalla.

Based on the BSP Charter, the BSP’s financial assistance to banking institutions is limited to the amount needed by the applicant bank to overcome the emergency or financial predicament but should not exceed 50 percent of its deposits and deposit substitutes. In addition, any emergency advance will be collateralized by government securities and other unencumbered first-class collaterals such as real estate.

As for the rural banks, Medalla said the BSP will soon launch the Rural Bank Strengthening Program (RBSP) which is aimed at assisting small banks hit by the pandemic.

The RBSP, which will replace the Consolidation Program for Rural Banks, will be implemented for three years. It is described as a structured program with four key elements: strengthened capital base; holistic menu of five time-bound tracks; incentives and capacity building interventions; and review and enhancements of existing regulations. These five time-bound tracks are merger and consolidation, acquisition/third party investment, voluntary exit/upgrade of license, capital build-up, and supervisory intervention.

Under RBSP, the BSP wants at least P60 million minimum capital requirement for rural banks. For rural banks with more than five branches, the minimum capital should be P200 million.

Meanwhile, the central bank recently circulated a proposed circular for banks’ guidelines for crafting their recovery plans. Basically, the BSP wants all banks to report within 24 hours if triggers in their recovery plans are breached and to activate recovery measures within three days.

The recovery plans of banks are expected to be commensurate to their size, nature and complexity of operations, overall risk profile, and systemic importance.

Once the circular is approved, banks will submit a recovery plan every June 30. Banks have until July 15 to post feedback or suggestions to the BSP on the guidelines of the recovery plans.

Since the pandemic was declared in March 2020, the BSP closed the operations of 21 rural banks while two rural banks voluntarily surrendered their banking licenses.

As of end-May this year, the BSP is supervising 498 banks, of which 45 are big banks which control over 90 percent of total banking resources. There are currently 43 thrift banks, 383 rural banks and 24 cooperative banks.

The banking sector’s NPL ratio has dropped to a 17-month low of 3.75 percent as of end-May while gross NPLs fell to P429.11 billion in May versus P447.44 billion in April. NPAs also decreased to P550 billion from P568.86 billion previously.

As of end-March, the BSP’s loans and advances amounted to P422 billion, lower compared to same period in 2021 of P665.4 billion and slightly up from the start of 2022 of P421.82 billion. These loans and advances include rediscounting loans and overdraft credit lines.

“The BSP extends discounts, loans and advances to banking institutions in order to influence the volume of credit consistent with objective of price stability and maintenance of financial stability. It also grants loans or advances to banking institutions in precarious financial condition or under serious financial pressures, subject to certain conditions,” said the BSP.