BSP exempts WB, ADB loans from bank lending cap
MANILA – – Banks have been given extra leeway to increase financing of high priority projects following the latest Bangko Sentral ng Pilipinas’ (BSP) directive to exclude loans guaranteed by Multilateral Financial Institutions (MFIs) from the cap on banks’ loans to subsidiaries and affiliates.
“(This latest decision by the Monetary Board) will enable concerned banks to increase their loan budget available to high priority projects (e.g. infrastructure) that attract MFIs guarantees,” BSP Governor Nestor A. Espenilla Jr. told reporters in a message Friday.
The central bank, in a statement, identified the MFIs as the International Finance Corp. (IFC), the lending arm of the World Bank (WB); the Manila-based Asian Development Bank (ADB), and the Credit Guarantee and Investment Facility.
The latest MB decision “aims to promote a level-playing field for bank borrowers through consistent application of regulatory limits on credit.”
Currently, MFI-guaranteed loans are exempted from the Single Borrower’s Limit (SBL) and the cap loans to Director, Officer, Stockholder and their Related Interests (DOSRI).
The exclusion of MFI guaranteed-loans would “recognize that the mitigation of credit risk similarly applies to all MFI-guaranteed loans regardless of whether the borrower is a third party, DOSRI, or a subsidiary or affiliate of the bank.”
“The rationalization of prudential measures is expected to result in greater flexibilities in financing the country’s large-scale projects for developmental purposes. In addition, the credit risk mitigant offered by MFIs will provide added cushion for the credit risk exposures of the banking system,” it added. (PNA)