BSP enables banks to lend more to 'priority projects'

The Bangko Sentral ng Pilipinas (BSP) has removed the ceiling on loans to subsidiaries and affiliates guaranteed by multilateral financial institutions (MFIs), a move that frees more money to be released in the financial system.

The rationalization of prudential measures is expected to result in greater flexibilities in financing the country’s large-scale projects for developmental purposes, the central bank said in a statement.

The central bank policy-setting Monetary Board (MB) approved the exclusion of all loans guaranteed by MFIs, in which the Philippine government is a member or shareholder, from the regulatory limits on bank loans to their subsidiaries and affiliates, the BSP said.

"It will enable concerned banks to increase their loan budget available for priority projects," BSP Governor Nestor Espenilla Jr. told GMA News Online.

The central bank considers the International Finance Corp., the Asian Development Bank, and the Credit Guarantee and Investment Facility as the multilateral financial institutions for the purpose of determining compliance with the policy.

"This policy amendment aims to promote level-playing field for bank borrowers through consistent application of regulatory limits on credit," the BSP said.

Under existing regulations, loans guaranteed by MFIs are excluded from the Single Borrower’s Limit and ceilings on a director, officer, stockholder and their related interests (DOSRI).

The amendment extends the exclusion to banks’ loans to subsidiaries and affiliates.

"This is to recognize that the mitigation of credit risk similarly applies to all MFI-guaranteed loans regardless of whether the borrower is a third party, DOSRI, or a subsidiary or affiliate of the bank," the BSP said.

(GMA News Online)