MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) has approved an additional 15 percent single borrowers’ limit (SBL) for loans to oil companies to finance the importation of crude oil and petroleum products.
In a decision last week, sources said the BSP’s policy-making body, the Monetary Board, has given the go signal to allow lending banks and quasi banks an additional SBL of 15 percent of its net worth as allowable loans, credit accommodations and guarantees granted for the importation of crude oil and petroleum products.
This would be a simple amendment to the BSP’s Manual of Regulations for Banks or MORB for bank and non-bank financial institutions. The MORB provides a separate individual 10 percent total and five percent unsecured limits and aggregate 20 percent limit on loans, other credit accommodations and guarantees granted by banks to their subsidiaries and/or affiliates.
The BSP in 2009 approved a separate SBL for energy and power-related loans and last year also approved a separate SBL for loans to finance infrastructure projects but this is limited up to three years only.
The SBL for infrastructure and development projects should be under the Public-Private Partnership (PPP) Program of the government. Under the new guidelines, banks can extend the equivalent of up to 25 percent of their net worth as loans, credit accommodations and guarantees for infrastructure projects covered under the PPP program.
BSP said however that a “prudential” feature included in the new guidelines is that the Director General of the National Economic Development Authority must certify that a particular infrastructure project falls within the PPP program. Only those projects with such certification qualify for the separate SBL provided under the new BSP guidelines.
The separate SBL has limited window of three years from the effectivity of the said regulation. Loans, credit accommodations and guarantees based on the contracted amount as of the end of the three-year period would not be increased but may be reduced and once reduced, said exposures shall not be increased thereafter.
During the past year, the BSP has received proposals from the banking sector on the possible changes to the SBL.
The SBL limits lending of a bank to a single client to only 25 percent of their capital. As a general rule, banks should spread their risks. By capping lending to a single client, the potential loss of a bank from that particular’s client failure will be limited.
