BSP tightens rules on past due, NPL

The Bangko Sentral ng Pilipinas has decided to tighten rules on past due and non-performing loans (NPL), including restructured loans starting 2018 for consistency and to meet global standards.

BSP Deputy Governor Nestor Espenilla Jr. said monetary authorities approved the amendments to the regulatory definition of past due and nonperforming loans to align with predominant global conventions and to achieve internal consistency of classification across all types of loan products regardless of payment schedule.

“In a way, it’s tightening the rules,” Espenilla said in an interview.

Under the new definition, an account that does not pay on contractual due date is deemed past due the following day.

At the same time, BSP supervised financial institutions (BSFI) 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.

The BSP said the cure period policy should be based on actual collection experience and reasonable judgment that support tolerance of occasional payment delays.

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 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 nonperforming if any contractual principal and/ or interest are 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 said.

Espenilla said BSFIs would be given a transition period of up to Dec. 31 to make the necessary revisions in their reporting systems.

This means that effective 2018, past due and non- performing loans shall be reported in accordance with the new definitions.

He said the revised policy provides a clearer basis for a restructured loan as its new definition now includes the purpose of restructuring.