Bangko Sentral eases rules on bank lending to subsidiaries, affiliates
To support lending for infrastructure projects under the government’s ambitious “Build, Build, Build” program, the Bangko Sentral ng Pilipinas has removed the cap on loans to bank subsidiaries and affiliates that were guaranteed by multilateral lenders.
“The Monetary Board approved the exclusion of all loans guaranteed by multilateral financial institutions (MFIs) where the Philippine government is a member or shareholder, from the regulatory limits on banks’ loans to their subsidiaries and affiliates,” the BSP said in a statement yesterday.
“It will enable concerned banks to increase their loan budgets for high priority projects, such as infrastructure, that attract MFI guarantees,” BSP Governor Nestor A. Espenilla Jr. said in a text message to reporters.
According to the BSP, it considers the following as MFIs: the Asian Development Bank, the Credit Guarantee and Investment Facility and the International Finance Corp.
“This policy amendment aims to promote level-playing field for bank borrowers through consistent application of regulatory limits on credit,” the BSP said.
The BSP noted that “under existing regulations, loans guaranteed by MFIs are excluded from the single borrower’s limit and ceilings on a director, officer, stockholder and their related interests (Dosri).”
Under the amended rules, the exclusion was extended to banks’ loans to affiliates as well as subsidiaries “to recognize that the mitigation of credit risk similarly applies to all MFI-guaranteed loans regardless of whether the borrower is a third party, Dosri, or a subsidiary or affiliate of the bank,” according to the BSP.
The BSP said “the rationalization of prudential measures is expected to result in greater flexibilities in financing the country’s large-scale projects for developmental purposes.”
Also, “the credit risk mitigant offered by MFIs will provide added cushion for the credit risk exposures of the banking system,” the BSP added.
Under “Build, Build, Build,” the government will roll out 75 flagship projects, with about half targeted to be finished within President Duterte’s term, alongside plans to spend up to P9 trillion on hard and modern infrastructure until 2022.
