BSP allows foreign banks to exceed single-borrower loan limits to boost lending

The central bank has adopted another coronavirus pandemic-related relief measure, this time allowing foreign banks in the country to lend more to companies which may have already reached their cap on loan exposures to single borrowers.

In a statement, the Bangko Sentral ng Pilipinas (BSP) said its Monetary Board approved the grant of regulatory relief to branches of foreign banks which were established in the Philippines prior to the effectivity of a 2014 law that allowed the full entry of these international financial institutions in the country.

The central bank said its latest among a wide array of measures to assist banks comes in the form of “nonimposition of sanctions” prescribed under existing regulations for breach in the single borrower’s limit until Dec. 31, 2021.

“Consistent with the other regulatory reliefs or initiatives earlier implemented by the Bangko Sentral ng Pilipinas, this measure is expected to help boost lending in support of businesses and sectors, and pump prime the country’s economic growth and post-pandemic recovery,” BSP Governor Benjamin Diokno said.

“Additionally, this will diversify credit exposures, particularly in financing big ticket projects, that otherwise will be concentrated to domestic banks,” he added.

The regulatory relief was extended in view of the lapse of the transitory period for the SBL computation on Dec. 31, 2020 implementing Republic Act No. 10641, which deregulated the entry of foreign banks into the Philippines.

As a control measure, new loans, credit accommodations or guarantees extended and existing credit exposures which are restructured, renewed and refinanced, beginning Jan. 1, 2021 until Dec. 31, 2021, shall not exceed the prescribed percentage limit using as reference point twice the level of capital or net worth of a foreign bank branch.

The total amount of loans, credit accommodations and guarantees that may be extended by a bank to any borrower shall be subject to a cap of 25 percent of the net worth of such bank.

The percentage limit has been temporarily increased from 25 percent to 30 percent until March 31, 2021 as part of the operational relief measures granted by the BSP to its supervised financial institutions.

There are 14 branches of foreign banks that are operating prior to RA No. 10641.