“About all you can do is dream of a white Christmas, for it seems like it always leaves us in the red.”

This quote about Christmas from the book "14,000 Quips & Quotes" by E.C. McKenzie aptly describes the position of the Chamber of Thrift Banks (CTB) and the Rural Bankers Association of the Philippines (RBAP) on the proposal by Department of Education (DepEd) Secretary Juan Edgardo Angara to grant teachers and DepEd personnel with outstanding loans a one-month loan amortization moratorium this holiday season.

In a letter dated Nov. 26, the former Senator proposed a moratorium covering loan payments and "all charges, costs, and interests" for all DepEd personnel for December, and for "bona fide residents or personnel of DepEd within calamity areas as declared by appropriate government agencies such as the Office of the President, local government units, or the Office of Civil Defense since September 2024."

As I stated in my previous piece, I support Angara's proposal as long as it does not negatively impact, in any way, the lenders' financial standing. This holiday goodwill gesture by Mr. Angara, however, may not be so magical for the bottom line of CTB and RBAP member banks. All right Virginia, while "ending up in the red" may be an exaggeration, forgoing a month's cash flow could take a heavy toll on their operations.

Banking 101 tells us that the Bangko Sentral ng Pilipinas (BSP) supervises universal, commercial, and thrift banks, cooperatives, development banks, savings and loan associations, trust corporations, and non-bank financial intermediaries. These institutions must meet mandated prudential regulations, such as capital adequacy ratios, minimum liquidity ratios, non-performing loan levels, and risk-weighting compliance with Basel regulations.

From what I hear within the BSP, the former Senator made this proposal without consulting or coordinating with the monetary authorities.

CTB president and Sterling Bank CEO Cecilio D. San Pedro and RBAP Executive Director Rafael Francisco D. Amparo pointed this out in their letter to the former Senator. "We laud and appreciate your initiatives to advance the interests and welfare of DepEd personnel. As such, both your requests will likely have regulatory and financial implications."

Heeding the request would significantly impact not only thrift banks and rural banks but all bank lenders.

Aside from BSP-related prudential limit concerns, the two bank associations appealed to Mr. Angara to “reconsider” his request for a blanket nationwide moratorium. Even for a short period, agreeing to this would result in substantial losses, potentially in the billions of pesos, for their member banks.

This is in addition to the administrative nightmare it would entail. Member banks would have to adjust their systems and processes, which cannot be implemented quickly enough to accommodate a moratorium this December.

Also, CTB and RBAP officers believe that a blanket moratorium for all DepEd personnel, including those unaffected by recent typhoons, would be inequitable to those directly impacted and may even adversely affect the borrowers' financial management.

However, all is not lost. CTB and RBAP are willing to support a moratorium for DepEd personnel in calamity-stricken areas, subject to BSP approval and certain conditions. These include making the moratorium optional, with eligibility requirements in place; and, importantly, not waiving interest but rather delaying settlement of accrued interest during the amortization pause via the Auto Payroll Deduction System.

Ultimately, I believe the moratorium should be coordinated with and approved by the BSP to ensure appropriate implementation and protect the banks.

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