Bangko Sentral readies new bank lending rules

The Bangko Sentral ng Pilipinas INQUIRER.net file photo

The Bangko Sentral ng Pilipinas will release new guidelines on credit-risk management, aiming to boost the accessibility of bank loans to small but viable businesses.

One of the highlights of the new guidelines, which are expected to be implemented within the year, is the easing of the collateral requirement in the extension of loans.

BSP Deputy Governor Nestor Espenilla Jr. said the regulator wanted banks to transform their credit-risk management practice from one that relied heavily on collateral to one that depended mainly on indicators of the viability of a business such as cash flow.

“Credit should not be all about collateral. Collateral is important but it should not be the main driver of credit extension,” Espenilla told the Inquirer.

He said the draft of the guidelines was almost complete and would soon be presented to banking industry members for consultation.

The intention of the BSP in issuing new guidelines on credit-risk management comes amid observations that bank loans remained hardly accessible to small businesses.

The collateral requirement is often blamed for this predicament as many small entrepreneurs do not have assets that can qualify as collateral.

The need to develop the micro, small and medium enterprises (MSMEs) sector has been cited by economists as crucial to helping reduce poverty and achieving economic growth that is inclusive.