BSP: No extensions for loan grace period under new curbs

BANGKO Sentral ng Pilipinas (BSP) Governor Benjamin Diokno clarified on Monday that there are no extensions to the mandatory grace period for the payment of loans despite the reimposition of the enhanced community quarantine (ECQ) in Metro Manila and surrounding provinces. He, however, urged local banks to still extend relief packages at this time.

In a news statement, Diokno said the 30-day grace period under the “Bayanihan to Heal as One Act” ceased to apply in June 2020. The new omnibus guidelines from the Inter-agency Task Force for the Management of Emerging Infectious Diseases (IATF), which was recently amended to implement the renewed ECQ for this year, does not operate to extend this 30-day grace period.

The implementation of a 30-day grace period for the payment of loans was previously provided under Section 8.2 General Provisions of the Omnibus Guidelines on the Implementation of Community Quarantine in the Philippines under Republic Act 11469 or the “Bayanihan to Heal as One Act.”

Despite the non-extension of the mandatory grace period, Diokno still urged local financial institutions to provide clients some sort of leeway depending on each bank’s current situation.

“The BSP strongly encourages Bsp-supervised financial institutions to continue to provide relief measures to its clients by renewing, restructuring, or extending the terms of the loans, among others, based on their continuing assessment of their cash flows,” Diokno said.

“The BSP will continue to closely monitor the impact of the pandemic on the financial industry to promptly address any emerging risk and to support a sustainable economic recovery,” he added.

Diokno also encouraged banks to take advantage of the time-bound tax exemptions and fee privileges under the Financial Institutions Strategic Transfer (FIST) Act.

The FIST Act was signed in February this year as a response to the rising non-performing loans (NPLS) in the country in the face of the pandemic-induced economic crisis.

The law allows banks to dispose of their bad assets through asset management companies, which will help ease banks’ exposure to bad debts moving forward.

With FIST, Diokno said the nonperforming loans ratio of banks is expected to decline by 0.63 to 0.71 percentage points.

For the BSP’S part, Diokno said they are currently streamlining the procedures for application of the certificate of eligibility (COE) of nonperforming assets.

Under the law, the COE will be issued by the regulatory authority (BSP, Securities and Exchange Commission, and Insurance Commission) for the purpose of obtaining tax exemptions and fee privileges.