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SEC offers relief for pandemic-hit financing, lending firms

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The Securities and Exchange Commission (SEC) has offered regulatory relief to financial and lending companies to help them cope with the effects of the coronavirus disease 2019 (COVID-19) pandemic.

In a Dec. 22 memorandum circular, SEC Chairman Emilio B. Aquino said one of the regulatory relief measures for companies is the relaxation of the required maintaining net worth of financial companies under Republic Act No. 8556 or the Financing Company Act (FCA).

Under the implementing rules and regulations (IRR) of FCA, financing companies are required to have a minimum paid-up capital of P10 million for those in Metro Manila and other first class cities; P5 million for those in other classes of cities; and P2.5 million for those in municipalities.

The law also requires a financing company to put up a minimum additional capital for each branch or extension office. An additional capital of P1 million should be allotted for those in Metro Manila and other first class cities; P500,000 for other classes of cities; and P250,000 for municipalities.

“The commission hereby provides the following regulatory reliefs to financing companies and lending companies to help the covered entities manage the effects of the COVID-19 pandemic,” Mr. Aquino said in the circular.

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Another relief that companies can opt to avail is the lower required investment in financing and lending activities, the SEC said.

Based on the rules, more than 50% of a financing company’s fund must be allocated or invested in its financing activities, while under the IRR of Republic Act No. 9474 or the Lending Company Regulation Act (LCRA), lending companies must use at least 51% of their funds for direct lending purposes.

The other relief that companies may avail is the relaxed period in the commencement of financing and lending operations under the IRRs of LCRA and FCA.

Under the said laws, a financing and lending company must start its operations within 120 days from the release of its certificate of authority to operate.

Mr. Aquino cited Republic Act No. 11494 or the Bayanihan to Recover As One Act (Bayanihan 2) as the reason for the regulatory relief measures. The law gave the SEC the authority to assist the industry in managing risks and potential losses amid the pandemic.

Meanwhile, the SEC said companies that avail of the measures are required to send documents such as a letter showing the intention to avail of the relief, the specific relief chosen and the reason behind choosing it, and a resolution from the company’s board of directors that approves the use of a regulatory relief.

“The company’s application to avail of the regulatory reliefs shall be subject to the commission’s evaluation, which shall be on a case-to-case basis,” Mr. Aquino said.

Recently, the SEC allowed the staggered booking of credit losses to help licensed financing companies, lending companies, and accredited microfinance non-government organizations during the pandemic.

It allowed the staggered booking of credit losses on or after Dec. 31, for a maximum of five years using the straight-line amortization method as seen in the profit or loss statement. — Revin Mikhael D. Ochave

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