THE Monetary Board, the policy-making body of Bangko Sentral ng Pilipinas, approved the exclusion of all loans guaranteed by multilateral financial institutions, where the Philippines is a member or shareholder, from the regulatory limits on banks’ loans to their subsidiaries and affiliates.
Bangko Sentral Governor Nestor Espenilla Jr. said in a statement Friday the move would “enable concerned banks to increase their loan budget available for high priority projects (such as infrastructure) that attract MFI guarantees.”
For the purpose of determining compliance with this policy, the Bangko Sentral considers International Finance Corp., the Asian Development Bank, and the Credit Guarantee and Investment Facility as multilateral financial institutions.
“This policy amendment aims to promote level-playing field for bank borrowers through consistent application of regulatory limits on credit. Under existing regulations, loans guaranteed by MFIs are excluded from the Single Borrower’s Limit and ceilings on a Director, Officer, Stockholder and their Related Interests,” Bangko Sentral said.
The amended regulations extended the exclusion to banks’ loans to subsidiaries and affiliates. The revisions aim to 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.