The Bangko Sentral ng Pilipinas (BSP) will introduce more reforms next year, including a new bank rating system dubbed “SAFr” and risk-based pricing of bank loans.
During the general membership meeting of the Chamber of Thrift Banks (CTB) on Tuesday, Nov. 19, BSP Deputy Governor Chuchi G. Fonacier said the current Camels supervisory rating system will be replaced with SAFr, or “Supervisory Assessment Framework.”
Fonacier said SAFr’s assessment will be business model-centric.
“Camels is an assessment of a previous period. SAFr is more forward-looking—it will take into account the business model of the bank, so it’s more bank-specific,” Fonacier said.
Fonacier later told reporters that assessments based on future plans were deemed a better measure than past performance.
“Overall, we will take into account the business model per bank, what’s driving the income and expenses, and the strategic direction of the bank,” she said.
SAFr will have a four-point rating scale or less than that of Camels, which had five. As such, SAFr will have no midpoint, Fonacier said.
Since its amended charter also gave the BSP flexibility in determining the frequency of bank examination, “for good behavior we may not be examining yearly—maybe every 2-3 years,” according to Fonacier.
Fonacier said SAFr was already approved in principle by the Monetary Board—the BSP’s highest policymaking body, although the new rating system will again be presented for final approval before yearend.
According to Fonacier, the BSP already piloted SAFr with one big bank and will possibly initially roll it out among large lenders before full implementation by June 2020.
Also by the second quarter of 2020, the BSP will adopt the planned risk-based pricing framework under which “risks associated with lending and financing are adequately compensated,” Fonacier said.
Under risk-based pricing, banks will provide credit at terms or rates based on customers’ risk profiles.
“Borrowers with lower risk profile should be charged with lower interest rates and vice versa,” Fonacier said.
The draft circular containing the rules on risk-based pricing was already being circulated to the industry, and Fonacier said some smaller players had expressed concern that the scheme may be “tedious” to implement.
In the case of bigger banks, Fonacier pointed out that some of them were already adjusting pricing to their relationship with clients./Edited by TSB