THE BANGKO SENTRAL ng Pilipinas (BSP) is extending the transitory period of the current basis for the Single Borrower’s Limit (SBL) of foreign bank branches in a move to boost support for the government’s infrastructure projects.
In a statement on Saturday, the central bank said the Monetary Board (MB) is giving foreign bank branches until Dec. 31 to use twice the level of their net worth as basis for their SBL.
The SBL ensures banks’ credit exposure to a single client will only be at a maximum of 25% of the lender’s net worth in order to trim down risks that may arise from a borrower’s default.
“This will allow foreign bank branches existing prior to Republic Act (RA) No. 10641 to continue supporting the public sector’s initiatives under the Build, Build, Build program,” the central bank said.
The central bank added that the extension of the transitory period will give foreign bank branches enough time to look into their credit exposures and to implement measures in line with the new SBL regulations, even with the reduced base amount to take effect only by next year.
RA 10641 amended the regulatory capital composition of foreign bank branches, removing the “net due to head office/branches/agencies abroad” account, effectively aligning with the minimum capital requirement for local banks of the same category.
“The said account previously formed part of adjusted capital where prudential and/or regulatory limits, including the SBL, are anchored,” the BSP said.
UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said the extension is positive for the financial system.
“The move to allow foreign banks do business in the local scene allows the higher probability of volatility and instability in the system. This will help cushion the domestic market and its players,” he said in a text message.
The BSP moved to allow for a separate 25% credit limit for public-private partnership (PPP) projects in 2010 in the hopes to lure banks into funding infrastructure projects of the government then under the leadership of former President Benigno Simeon C. Aquino, III. The said scheme lapsed by December 2016.
Meanwhile, in 2018, the MB allowed a separate SBL for special purpose entities that take part in implementing major infrastructure projects under the administration of President Rodrigo R. Duterte.
The MB has already approved 12 foreign bank applications since RA 10641 has been implemented in 2014. To date, there are 29 foreign banks that have set up shop in the country. — Luz Wendy T. Noble