BSP moves to calm jittery markets with relief package for banks

The Bangko Sentral ng Pilipinas (BSP) on Monday took another preemptive step to calm local financial markets made jitter by the coronavirus epidemic, saying the regulator will be more lenient with banks that may be affected by defaults from struggling borrowers.

In a text message to reporter, BSP Governor Benjamin Diokno also said that fears of a loan growth slowdown or a sharp spike in bad loans among local banks because of the COVID-19 crisis are “unfounded”.

“The fact is that Philippine banks are adequately capitalized,” the central bank chief said. “They have capital adequacy ratio much higher than BSP-prescribed 10 percent and Bank of International Settlements-prescribed 8 percent.”

Nonetheless, the country’s top financial regulator said the authorities were not taking any chances and laid out a slew of measures aimed at calming investors, marked by yesterday’s slide by the Philippine Stock Exchange index into bear market territory.

“In recognition of potentially crippling impact of certain events like Covid-19, African Swine Flu and other unforeseen calamities, BSP has made available a grant of regulatory relief to some concerned banks and quasi-banks,” he said.

Diokno explained that these temporary regulatory relief measures include, among others, staggered booking of allowance for credit losses, non-imposition of penalties on legal reserve deficiencies, and non-recognition of certain defaulted accounts as past due.

The BSP chief announcement echoes last month’s statement by the central bank that it had made available a grant of regulatory relief to banks and quasi banks that have sustained losses due to exposures to borrowers, industries and sectors severely affected by the African Swine Flu and the coronavirus disease.

“This is in recognition of the potentially crippling impact of these events on key industries. We believe that the grant of regulatory and rediscounting relief measures is also applicable to financial institutions whose clients have suffered from adverse effects of these crises,” Diokno said.

Edited by TSB