Bangko Sentral eases Dosri rules

The Bangko Sentral ng Pilipinas has relaxed rules governing Dosri (directors, officers, stockholders and related interests) loans.

In a circular, the BSP said loans guaranteed by international financial institutions or multilateral agencies were not covered by the ceiling on loans, other credit accommodations and guarantees that banks could extend to their directors, officers, stockholders and related interests.

This was contained in Circular 785, which amended pertinent provisions of the Manual of Regulations for Banks on exclusions from ceiling on Dosri loans.

According to BSP Deputy Governor Nestor Espenilla Jr, who is in charge of the bank supervision division, developments in the country’s business environment had necessitated the issuance of the circular that gave flexibility to banks in extending Dosri loans.

The Dosri rule limits the loans and guarantees that can be granted by a bank to a single director, officer, stockholder or related interest to an amount equivalent to his unencumbered deposits or the book value of his paid-in capital contribution to the bank.

The rule also states that, except with the prior approval of the BSP’s Monetary Board, the combined outstanding Dosri loans and guarantees should not exceed 15 percent of the bank’s total loan portfolio or 100 percent of the bank’s net worth, whichever is lower.

Espenilla cited the case of the International Finance Corp. (IFC), a multilateral agency that is part of the World Bank Group, in explaining the importance of the relaxation of the Dosri rule.

He said some of the development programs of the IFC involved investment in banks, which made IFC a shareholder of a bank. At the same time, the IFC invests in developmental initiatives of private firms.

“We noted that some multilateral agencies like IFC have developed useful country assistance programs that involve investments in banks as a shareholder while also running programs that provide guarantees to some desirable bank lending activities,” Espenilla said.

“There is a possibility that the same bank may benefit from both programs and this will potentially raise technical Dosri issues. The new regulation clarifies and resolves this concern,” Espenilla told the Inquirer.