The Bangko Sentral ng Pilipinas (BSP) has clarified that big banks’ exposures to infrastructure projects for public use will not be included in the prudential real estate loan limits. “Loans (and/or) investments to finance the construction, rehabilitation, and improvement of real estate such as fixed assets, permanent structures, immovable facilities, or physical improvements are considered exposures to public infrastructure projects that are not covered by prudential limits,” said BSP Deputy Governor Chuchi G. Fonacier in a text message, referring to the recently issued memo (BSP Memorandum No. M-2022-039) that she signed on April 28. Fonacier said the memo specifically clarified that loans to construct highways, bridges, airports, physical component of telecommunications or telco, and information technology (IT) such as satellite stations, data center facilities, data recovery sites and telco towers “are deemed exposures to public infrastructure” and will not be subjected to prudential limits imposed on universal and commercial lenders. Also included are the construction, rehabilitation and improvement of streets, tunnels, railways, railroad, transport systems, ports, power plants, hydropower projects, canals, dams, water supply, irrigation, land reclamation projects, industrial estates or townships, government buildings and housing projects, public markets, slaughterhouses, warehouses, solid waste management, sewerage, flood control, drainage, dredging and other infrastructure projects that are intended for public use. Meanwhile, Fonacier said loans and investments that finance the general administration and maintenance of operations of entities operating or working on such infrastructure projects are not considered exposures to public infrastructure projects and will have prudential limits. These include the cost of equipment, machineries and the like, as well as services and related items. “(These) are not considered exposures to public infrastructure projects, except if the expenditure/cost is needed to build, rehabilitate, or improve a physical component of said infrastructure project for public use and such expenditure/cost is allowed to be capitalized as part of the cost of the fixed asset, permanent structure, immovable facility, or physical improvement,” she said. Big banks’ real estate exposures have to comply with prudential limits set by the BSP’s real estate stress test (REST) limits. At the moment, regulatory measures governing real estate exposures of banks include a loan limit of 25 percent of total loan portfolio, net of interbank loans, as well as the REST limits. The loan limit was 20 percent since 2008 but in 2020, in the middle of the pandemic lockdowns, the BSP decided to raise big banks’ limit on their real estate lending to 25 percent to increase credit to the property sector. However, the banks will have to comply with rigid stress testing for risks monitoring. At the time, the BSP said the increase in the limit will release about P1.2 trillion additional real estate lending. There are exemptions to the BSP’s rule that limits real estate loans such as housing loans and loans to real estate developers of socialized and low cost housing under the government programs. Since loans for public infrastructure construction is not part of real estate loans as a category, infrastructure development is not covered by the loan limit imposed by the BSP on real estate lending by banks, but subject to other risk management policies. Meanwhile, Fonacier said the memo also clarified that loans and investments in debt and equity securities, the proceeds of which are used to finance infrastructure projects for public use, are also excluded from the composition of real estate exposures for purposes of compliance with REST limits.