El Niño-affected finance institutions get BSP help

Small financial institutions operating in areas badly hit by the dry spell due to the El Niño phenomenon could avail of a one-year regulatory and rediscounting relief from the Bangko Sentral ng Pilipinas (BSP) in order to help their borrowers, who are mostly farmers and small businessmen.

“Due to severe drought conditions affecting several provinces, borrowers in the affected areas could face difficulty in paying their loans,” the BSP said in a statement Thursday.

The Monetary Board, the BSP’s highest policy-setting body, last May 13 approved the following relief measures:

For affected cooperative, rural and thrift banks as well as non-bank financial institutions with quasi-banking functions (NBQBs), borrowers’ outstanding loans would be excluded from the computation of past due ratios. There would also be a reduction of the general loan loss provision for borrowers’ restructured loans to 1 percent from 5 percent.

There would be a non-imposition of penalties on legal reserves deficiencies as well as a moratorium on monthly payments due to the BSP in the case of banks with ongoing rehabilitation programs.

Small financial institutions would also be allowed to book on a staggered basis allowances for probable losses over a maximum of five years for all types of credit extended to individuals and businesses in areas directly affected by El Niño.

In the case of rediscounting banks, they would be granted a 60-day grace period to settle with the BSP their outstanding rediscounting obligations as of the date of declaration of the state of calamity in their respective areas.

The BSP would also allow rediscounting banks to restructure, on a case-by-case basis, the outstanding rediscounted loans of El Niño-affected borrowers.

Financial institutions that would avail of these relief measures shall be covered by additional specific and other prudential conditions, the BSP said.

BSP said the dry spell and the havoc it brought to provinces warranted an “immediate response through the grant of regulatory and rediscounting relief measures to banks and non-bank financial institutions with quasi-banking functions (NBQBs) with head offices and/or branches located in the areas which have been or may be declared by the national disaster risk reduction management or the local sanggunian, upon the recommendation of the regional or local disaster risk reduction management as under a state of calamity.”

The BSP’s El Niño relief measures would be effective for one year, starting from the time the state of calamity was declared in the area.