Banks’ pandemic relief measures to stay in ’22
Regulatory relief provisions to support the banks’ response to the effects of the pandemic have been extended by at least one year, according to the Bangko Sentral ng Pilipinas (BSP).
These relaxed measures, which were supposed to have expired last Dec. 31, include the temporary increase in the Single Borrower’s Limit (SBL) and the separate SBL for project finance exposures to 30 percent from 25 percent; and nonimposition of sanctions for breach in SBL by covered foreign bank branches, subject to conditions.
Other relief measures are a reduction in both the credit risk weights of current loans to micro, small and medium enterprises (MSMEs) to 50 percent as well as the Minimum Liquidity Ratio (MLR) of stand-alone thrift banks, rural banks and cooperative banks to 16 percent.
The MLR is expressed as a percentage of a bank’s eligible stock of liquid assets to its total qualifying liabilities.
These measures are intended to encourage lending, grant of financial relief to creditworthy borrowers, and use of MSME loans as alternative compliance with BSP reserve requirements.
‘Pandexit’
In early January, the BSP had broached the idea of entering a path toward a “pandexit” by unwinding relief measures, but clarified that the timing for this was still uncertain.
On Thursday, BSP Governor Benjamin Diokno said in his weekly talk with the media “the sudden rise in COVID-19 cases in the country in early January 2022 prompted the BSP to adopt a more cautious stance by keeping these relief measures in place.”
“This will ensure that [BSP-supervised financial institutions or BSFI] continue to be well-positioned to meet the financing requirements of households and businesses amid the pandemic,” Diokno said.
Also, the BSP chief said the extension of these prudential relief measures until end-2022 was meant to sustain the momentum of bank lending as well as minimize any long-term economic scarring due to the pandemic.
Further, the BSP has extended operational relief measures until end-2022 to provide banks with the flexibility to focus their limited resources on the delivery of core financial services to the public.
These include the relaxation of the customer identification requirements to facilitate the opening of deposit accounts and support the speedy disbursement of social amelioration funds to intended beneficiaries and electronic financial transactions.
Notification requirements
Also included is the relaxation of notification requirements for changes in banking days and hours and temporary closure of head offices, bank branches and branch-lite units as well as BSFI offices and service units to provide flexibility in managing operations in case of periods of heightened health risk during the year.
In addition, the BSP deferred the submission of selected prudential reports that fall due in January to March 2022 by one quarter, and lengthened the period of compliance with BSP supervisory and notification requirements until June 30.
Last January, Diokno said the timing and conditions under which the BSP will start unwinding its pandemic-induced interventions will continue to be guided by the inflation and growth outlook over the medium term and the risks surrounding such outlook.
He said the BSP needs to strike a delicate balance between providing adequate stimulus to the economy and preventing the build up of inflationary pressures and risks to financial stability.
