BSP gains more power to collect unpaid loans, advances from banks

With over 1200 billion worth of loans and advances to banks, the Bangko Sentral ng Pilipinas (BSP) now has more teeth to go after erring banks with unpaid loans from the central bank based on its amended charter.

BSP Senior Assistant Governor and General Counsel, Atty. Elmore O. Capule, said the provisions in the amended BSP charter included several, and major, enhancements to its credit operations to reinforce its corporate and financial viability.

“(The) BSP is the bank of all banks so inevitably we grant loans to banks, and we become a creditor. If they default or they cannot pay, then we have to collect. We have a lot of problems collecting from banks,” said Capule. As of end-November 2018, the BSP’s total loans and advances amounted to 1237.94 billion, 56 percent higher compared to end-November 2017 of 1152.63 billion.

With the new provisions under the just signed Republic Act 11211 (“An Act Amending Republic Act No. 7653, Otherwise Known as the ‘New Central Bank Act’, and for Other Purposes”), the collaterals on loans and advances released by the BSP will no longer be restricted by any other court process or administrative restrictions on land use since it will not be included in the property of insolvent persons or institutions.

These enhancements to credit operations are: Exemption of collaterals from attachments, executions and other restrictions; deputization of legal staff in foreclosure cases; take possession of foreclosed property without posting a bond; and unsecured claims shall be considered preferred credits. The additional provisions will enable them to collect banks’ indebtedness from the BSP more effectively. “They also allowed us to deputize our legal staff to become special sheriffs in foreclosure cases,” said Capule.

The new provisions empower the BSP to take possession of foreclose property immediately. “Even our claims (we can collect) so long as it is clearly established (that we can collect). These claims are considered preferred credits,” said Capule.

He added: “The reason here is very simple, public funds are being used to finance these borrowings … public interest requires that the people’s money should be given priority whenever we have claims from these banks.”

The bulk of the BSP loan portfolios are loans extended to the Philippine Deposit Insurance Corp. (PDIC) and the rest from the National Government. The rediscounting facility, banks’ emergency loans and overnight clearing line are also under loans and advances.

The PDIC borrows from the BSP to extend financial assistance to banks’ rehabilitation and also to cover deposit insurance. The emergency loan releases, in the meantime, are limited to 50 percent of a bank’s outstanding deposits and must be collateralized, but the loans are given in two tranches and must be settled in full after 91 days.