BSP won’t impose sanctions on foreign bank branches for SBL breach

THE central bank will not impose sanctions on the branches of foreign banks for the breach of the single borrower’s limit (SBL) until Dec. 31, 2021, in a bid to boost lending amid the pandemic.

The Monetary Board approved the regulatory relief measure in a meeting on Dec. 28, Bangko Sentral ng Pilipinas Governor Benjamin E. Diokno said in a statement.

“Consistent with the other regulatory reliefs or initiatives earlier implemented by the Bangko Sentral ng Pilipinas (BSP), this measure is expected to help boost lending in support of businesses and sectors, and pump prime the country’s economic growth and post-pandemic recovery,” Mr. Diokno said.

“This will diversify credit exposures, particularly in financing big ticket projects, that otherwise will be concentrated to domestic banks,” he added.

The measure is applicable to 14 branches of foreign banks that have established their presence in the country prior to the Republic Act No. 10641 which allowed the full entry of foreign banks in the Philippines.

The government is banking on its infrastructure program to help drive recovery in 2021.

Economic managers expect to spend P1.17 trillion for its infrastructure projects in 2021, which is equivalent to 5.9% of the country’s gross domestic product (GDP).

Acting Socioeconomic Planning Secretary Karl S. Chua said in a forum earlier this month that spending an equivalent of 5% of the GDP in the construction sector will be “sufficient for the economy to rebound strongly” and generate more jobs.

In February, the BSP extended the transitory period of the current basis for the SBL of foreign bank branches to boost support for the government’s infrastructure projects.

“As a control measure, new loans, credit accommodations or guarantees extended and existing credit exposures which are restructured, renewed, and refinanced, beginning Jan. 1, 2021 until Dec. 31, 2021, shall not exceed the prescribed percentage limit using as reference point twice the level of capital or net worth of a foreign bank branch,” the central bank said.

In March, the BSP increased the SBL to 30% from 25% for six months to provide support to banks during the pandemic. By July, it was extended until March 2021.

To recall, the central bank allowed for a separate 25% credit limit for public-private partnership projects in 2010 in the hopes to encourage banks to extend financing to infrastructure projects under then President Benigno Simeon C. Aquino III. The scheme lapsed by December 2016.

Meanwhile, in 2018, the Monetary Board approved a separate SBL for special purpose entities that take part in implementing major infrastructure projects under the administration of President Rodrigo R. Duterte. — Luz Wendy T. Noble