The Bangko Sentral ng Pilipinas (BSP) on Monday took another preemptive step to calm local financial markets made jittery by the coronavirus (COVID-19) epidemic, saying the regulator will be more lenient with banks that may be affected by defaults from struggling borrowers. 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 were “unfounded.”
“The fact is that Philippine banks are adequately capitalized,” the central bank chief said. “They have a 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.
“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 included, 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’s announcement echoed 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 their exposure to borrowers, industries and sectors severely affected by the African swine flu and the coronavirus disease.
“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.
The BSP has institutionalized the grant of regulatory relief to banks impacted by calamities under Circular No. 1071 on the
Banks that will avail themselves of the relief measures will be evaluated by the BSP on a case-by-case basis. INQ