THE CENTRAL BANK has extended the implementation of a higher single borrower’s limit and less stringent rules on recognizing bad loans to continue providing relief to lenders as the coronavirus crisis stretches on.

In Memorandum No. M-2021-026 signed by Bangko Sentral ng Pilipinas (BSP) Deputy Governor Chuchi G. Fonacier, the central bank said the Monetary Board approved on April 22 the extension of these current regulatory relief measures as “an interim measure pending the full operationalization of the Financial Institutions Strategic Transfer (FIST) Act in 2021.”

The circular said the higher single borrower’s limit of 30% (from 25%) will remain in effect until Dec. 31. A previous issuance said the higher limit would be enforced only until March 31.

The BSP also eased the recognition of some loans as part of past due or nonperforming, allowing banks to exclude them from classification until Dec. 31. These types of credit include loans that should have been reclassified as past due as of March 8, 2020 and those that have become past due or nonperforming six months from March 8, 2020 up to March 31, 2021.

Loans are considered nonperforming when they are left unpaid for 30 days or more.

The BSP said banks availing of the relief measure on loan classifications should disclose this to the regulator starting from the reporting period ending on April 30 in the case of the supplemental report that will accompany the Solo Financial Reporting Package. Meanwhile, in the case of the supplemental report that will accompany the Capital Adequacy Report, this should be disclosed starting from the reporting period ending on June 30.

The central bank has also encouraged banks to restructure loan accounts with the consent of borrowers and to offer less heavy payment schemes as the pandemic continues to affect economic activity.

“The restructuring arrangement should be based on terms agreed upon by the bank and the borrower, considering, among others, the latter’s paying capacity and cash flows or sources of repayment, including the changes in the timing and amount of their borrower’s cash flows,” the BSP said.

The government did not impose a mandatory loan moratorium when it put Metro Manila and nearby provinces under lockdown in the past month amid a fresh surge in infections. The BSP, however, encouraged banks to provide assistance to borrowers through renewing, restructuring, or extending terms of loans.

The banking industry’s nonperforming loan ratio stood at 4.05% as of end-February, the highest since the 4.09% in October 2009.

While the ratio is expected to go beyond 5% this year, BSP officials have said the banking sector remains stable and well-capitalized, with lenders’ capital ratios still beyond minimum regulatory requirements.

BSP Governor Benjamin E. Diokno earlier said they expect banks to sell at least P152 billion in nonperforming assets to take advantage of Republic Act No. 11523, which allows them to offload bad assets to FIST corporations. — L.W.T. Noble