BSP keeps close watch on LGU borrowings

The Bangko Sentral ng Pilipinas (BSP) is keeping a close watch on the borrowings of local government units (LGUs), as well as government owned and controlled corporations (GOCCs).

BSP Governor Amando Tetangco Jr. has issued a circular requiring the approval of the Monetary Board before LGUs and GOCCs could secure any loans or borrowings.

The circular laid down the guidelines in the processing for Monetary Board opinion on the monetary and balance of payments (BOP) implications of proposed domestic borrowings by government entities as mandated by Republic Act 7653 or the New Central Bank Act of 1993.

The guidelines are contained in the approved amendments to the Manual Regulations for Banks (MORB) through Appendix 57 for LGUs and 57A for GOCCs, local water districts (LWDs) as well as state universities and colleges (SUCs).

Under the process, government entities are required to submit a written request to

the BSP for Monetary Board opinion on the monetary and BOP implications of their proposed borrowing prior to the loan release.

The BSP would acknowledge receipt of the request, with an initial evaluation of the documents or information submitted. Incomplete and inconsistent documents would not be processed.

The LGUs as well as borrowing government entities including GOCCs, LWDs, and SUCs would be informed in writing of the Monetary Board’s decision in its request for opinion.

The loan proceeds should only be released by the lending institution to the LGUs and borrowing government entities subject to the submission of a duly executed ordinance approving the proposed borrowing, its purpose, and terms.

Likewise, the opinion of the Monetary Board is limited to the assessment of the monetary and BOP implications of the proposed borrowing based on the information contained in the documents submitted as well as the assumption that the proceeds of the borrowing would be used for the intended purpose.

The opinion is valid for one year from the date of issue.

Furthermore, LGUs and borrowing government entities should submit to the BSP a post-borrowing report on the final terms and conditions as well as the utilization of the proceeds of the borrowing within 30 days after the final disbursement of the loan proceeds.

Tetangco said any violation would be subject to appropriate enforcement or supervisory actions under the MORB and RA 7653.