Providing safe, sound and efficient financial services amid the pandemic
The BSP has served as a guardian of financial stability amid the present health crisis, implementing prudential relief measures designed to assist BSP supervised financial institutions (BSFIs) and support households and business enterprises. The measures serve to complement the BSP’s existing regulatory relief policy, which sets a uniform and systematic approach in granting regulatory relief for banks affected by calamities.
PRUDENTIAL RELIEF MEASURES FOR THE BANKING SYSTEM
The BSP implemented timely and decisive measures intended to ensure that the Filipino people continue to have uninterrupted access to basic and essential financial services and products, even during this time of crisis. These measures provide incentives for BSFIs to extend financial relief to their borrowers; incentivize lending; promote continued access to financial services; and support the accelerated use of digital platforms to deliver financial services— enabling consumers to complete financial transactions during the community quarantines. These are time-bound, suited to the identified concerns, and crafted so as not to compromise the long-term viability of financial institutions.
Extension of financial relief to borrowers. The BSFIs were given regulatory relief to enable them to grant equivalent financial relief to borrowers in the form of more flexible and favorable lending terms, or restructure loan accounts. These include the temporary exclusion of loans of affected borrowers from the past due and nonperforming classification. Banks are also allowed the staggered booking of allowance for credit losses for loans extended to affected borrowers. Lastly, banks with outstanding rediscounting obligations with the BSP are entitled to a grace period for their payments, or restructure the rediscounted loans. Incentivize lending. The BSP’s prudential measures aim to assist the micro, small and medium enterprises (MSMEs), as well as certain large enterprises, to carry on with their business during the Coronavirus disease 2019 (COVID-19) crisis and hasten the recovery and sustainability of their operations during the post-crisis period. Relative to this objective, the BSP reduced credit
risk weights of MSME loans; allowed pesodenominated loans to MSMEs and certain large enterprises as forms of alternative compliance with the reserve requirements against deposits and deposit substitutes; temporarily raised the Single Borrower’s Limit (SBL); and deferred the implementation of the enhanced capital rules, while reducing the minimum liquidity requirements for stand-alone thrift, rural and cooperative banks (TBs and R/CBs). Banks were also allowed to utilize capital and liquidity buffers during the crisis situation. Promotion of continued access to financial
services. Policies were set to ensure access to formal financing channels by retail clients, who would be deeply affected by the community quarantine arrangements. The use of information technology in financial transactions is highly promoted during and beyond the pandemic.
The BSP also relaxed know-your-customer (KYC) rules to facilitate access to formal financing channels. It urged BSFIs to suspend fees and charges on the use of online banking or e-money, including fees on the use of InstaPay, PESONet and interbank ATM transactions. Meanwhile, the BSP waived the license fees on the provision of Advanced Electronic Payments and Financial Services (EPFS), as well as transaction fees charged for fund transfers made with PhilPaSS.
Finally, the BSP issued guidelines and reminders to augment existing capabilities of BSFIs and enable them to implement appropriate strategies to address the increasing demand for digital channels — effectively managing the attendant risks such as increasing financial crimes and cyber-attacks, among others. Support for continued financial services delivery.
The BSP granted operational relief measures for BSFIs that recognized disruptions in their operations due to the COVID-19 pandemic. The relief measures enabled them to focus their limited resources on the delivery of financial services and support their subsequent recovery efforts. These include the easing of the BSP reportorial requirements; suspension of monetary penalties on delays in the submission of reports and reserve deficiencies; relaxation of certain notification requirements; provision of accounting relief measures to reduce the impact of mark-to-market (MTM) losses on BSFIs’ financial condition; and the temporarily easing of the exposure limits for the Unit Investment Trust Fund (UITF).
INITIAL IMPACT ASSESSMENT OF BSP RELIEF MEASURES
The BSP conducted an initial assessment of credit growth trends to assess the impact of BSP’s timely implementation of policy responses and prudential relief measures at the onset of COVID-19 pandemic. Results showed that credit growth was sustained, although lower than previous quarters, and remained supportive of the requirements of the domestic economy confronting the challenges of the COVID-19 pandemic. As of end-April 2020, the banking system’s total loan portfolio (TLP) reached P10,971.1 billion and posted a sustained growth of 7.8% year-on-year, albeit decelerated compared to end-April 2019’s 12.2%. The slowdown in TLP growth is primarily due to the limited economic activity during the lockdown. Nonetheless, the TLP accounts for 58.8% of total assets, and 56.1% share of nominal gross domestic product or GDP.
A welcome consequence of the COVID-19 pandemic is the apparent shift of financial consumers toward digital platforms. Based on available data, the volume and value of cheque transactions and automated teller machine (ATM) withdrawals substantially fell during the enhanced community quarantine (ECQ). In contrast, the InstaPay and PESONet transactions jumped during the same period. This behavioral shift is seen to continue as consumers adapt to what BSP Governor Benjamin Diokno calls as the “New Economy” and further promotes the BSP’s financial inclusion agenda.
With this assessment indicating that credit growth remains sustained and the banking system fundamentally sound and stable amid the COVID-19 pandemic, the BSP remains committed in vigilantly monitoring ongoing developments in the banking system. It will be proactive and decisive in pursuing timely, calibrated and proactive policy and supervisory responses to ensure the continued provision of safe, sound and efficient financial services to the Filipino people.