THE Bangko Sentral ng Pilipinas (BSP) is implementing measures that will allow banks to continue providing credit for micro, small, and medium-sized enterprises (MSMEs) that are struggling amid the coronavirus disease 2019 (COVID-19) pandemic.

In a statement on Tuesday, the BSP said the Monetary Board gave the go signal for “prudential measures to assist the (MSME) sector carry on with its business during the (COVID-19) crisis, as well as hasten recovery and sustainability of MSME operations in the post-crisis period.”

“To enable stand-alone thrift banks, rural banks and cooperative banks to continue to support their MSME- and rural community-based clients, the BSP deferred the implementation of the revised risk-based capital framework applicable to these banks under Circular No. 1079 dated Mar. 9, 2020,” the BSP said.

The effectivity of the revised capital adequacy framework has been moved to January 2023, instead of January 2022. The observation period for this framework was pushed back to Dec. 31, 2022 from the initial date of Dec. 31, 2021.

“The observation period provides these banks with enough time to meet the new minimum capital ratios through reasonable measures without disrupting their banking activities,” the BSP said.

The framework, which was based on Basel III standards, mandates smaller lenders to have a common equity Tier 1 (CET1) ratio of at least six percent of its risk weighted assets. It also requires these lenders to have Tier 1 ratio and capital adequacy ratio of at least 7.5% and 10%, respectively.

Moreover, the circular requires smaller lenders to have a capital conservation buffer of 2.5%, which will comprise CET1 capital.

The BSP also approved the assignment of a zero risk weight for MSME loans guaranteed by the Philippine Guarantee Corp., Agricultural Guarantee Fund Pool and the Agricultural Credit Policy Council.

“The revision in the credit risk weight complements programs of the National Government that support financing to MSMEs as well as small farmers and fisherfolk,” the central bank said.

Earlier, the BSP approved the temporary reduction in the credit risk weights of loans granted to MSMEs that are current in status. This will be reviewed again by the BSP by end-2021.

The central bank described the MSME sector as a “vital component of the Philippine economy.”

Based on government data, MSMEs make up 99.5% of business establishments in the country and have created 5.7 million jobs equivalent to about 63.2% of total employment.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the new measures rolled out by the central bank would “incentivize banks to increase lending and to cater more to MSMEs in the rural areas,” such as farmers and fisherfolk.

The new set of relief measures was announced on Tuesday, following a memorandum on Monday which allowed financial firms to utilize their Basel III-mandated capital and liquidity buffers to cushion the impact of the pandemic. — Luz Wendy T. Noble