Rules on bad loans eased

The Bangko Sentral ng Pilipinas has eased rules on past due and non-performing loans to align them with international standards.

In a statement, the BSP said the amendments to the regulatory definitions of past due and non-performing exposures, including restructured loans, were aimed at aligning them with predominant global conventions as well as achieving internal consistency of classification across all types of loan products regardless of payment schedule.

The Monetary Board, the BSP’s highest policy-setting body, earlier approved these refined definitions in a bid to “promote a more responsive and consistent regulatory approach for BSP-supervised financial institutions.”

According to the BSP, “the general rule is that an account that does not pay on contractual due date is deemed past due the following day” under the new definition.

“However, BSP-supervised financial institutions are allowed to provide for a cure period policy on a credit product-specific basis within which clients may be allowed to catch up on a late payment without being considered as past due, provided that the cure period policy is based on actual collection experience and reasonable judgment that support tolerance of occasional payment delays,” it said.

“On the other hand, an account or exposure is considered non-performing, even without any missed contractual payments, when it is deemed impaired under existing applicable accounting standards, classified as doubtful or loss, in litigation, and/or there is evidence that full repayment of principal and interest is unlikely without foreclosure of collateral, in the case of secured accounts. All other accounts, even if not considered impaired, shall be considered non-performing if any contractual principal and/or interest is past due for more than 90 days, or accrued interests for more than 90 days have been capitalized, refinanced, or delayed by agreement,” the BSP added.

The BSP will give the financial institutions it supervises until Dec. 31 to revise their management information and reporting systems with regards past due as well as non-performing exposures.