Past due, NPLs covered by forbearance measure minimal

Total loans covered by regulatory relief measures, particularly the delayed recognition of past due and non-performing loans (NPL), accounted for less than three percent of the industry’s total loan book as of end-February, according to the Bangko Sentral ng Pilipinas (BSP).

The BSP’s Supervisory Research and Report Group said the decision of the central bank to immediately deploy relief measures has ensured the sustained capacity of BSP-supervised financial institutions (BSFIs) to perform their pivotal role in the economy amid the pandemic.

For one, the regulator allowed banks to exclude exposures of borrowers affected by the global health crisis from the determination of past due loans and NPLs until end-December this year.

Data showed that past due loans under regulatory forbearance only amounted to P6.6 billion or 1.2 percent of the P548.4 billion in total past due loans as of end February.

Likewise, soured loans under regulatory forbearance reached P12.2 billion or only 2.8 percent of the P428 billion gross NPLs as of end-February.

“Preliminary data as of end-February 2021 showed that loans under the regulatory forbearance is minimal in amount,” the BSP said.

It said most of the financial institutions that applied the regulatory relief measure on the exclusion of past due loans and NPLs were rural and cooperative banks (74) followed by thrift banks (five), universal and commercial banks (four), as well as non-bank financial institutions (two).

According to the BSP, the amount under forbearance is closely monitored internally for purposes of supervisory assessment of individual banks and development of corresponding supervisory plan of a BSFI.

The BSP said the restructured loans of banks quadrupled to P199.4 billion in end-February from P45 billion in the same period last year.

“It should also be noted that while there has been adjustment in the past due loans and NPLs brought about by the forbearance measures, asset quality indicators are expected to continue to be affected as cash flows of businesses and individuals are still impaired and loan payment moratorium has ended,” the BSP said.

Last month, the International Monetary Fund (IMF) said prompt loss recognition and non-performing loan (NPL) restructuring would help Philippine banks prevent sharp deleveraging and lead to faster recovery from the pandemic-induced recession.

In its latest Financial System Stability Assessment on the Philippines, the multilateral lender said the BSP should now withdraw forbearance measures introduced at the height of the COVID-19 outbreak last year.

“The central bank should allow forbearance measures to lapse as scheduled and avoid introducing new measures, as delayed loss recognition and NPL restructuring could limit credit growth,” the IMF said.