Date of Issuance: 09 January 2013
The Monetary Board decided to extend for another three (3) years the original three (3)-year period allowing a separate single  borrower’s  loan (SBL) limit of 25% of  the net  worth of the lending  bank/quasi-bank for loans, credit  accommodations  and  guarantees  granted  for  undertaking infrastructure and/or development  projects  under  the Public-Private  Partnership  (PPP)  Program.
The extension of another three (3) years for the separate 25% SBL for PPP infrastructure and/or development projects is expected to encourage the financial sector’s participation in the PPP Program of the government, particularly with respect to the projects.
Download BSP Circular No. 779 s 2013 here.
19 October 2012, The Philippine Star
by Prinz Magtulis
Monetary authorities have removed the cap on total loan guarantees banks and similar institutions are allowed to offer, saying such “leeway” is safe and warranted to support the government’s tack on improving the country’s infrastructure.
“The Monetary Board recently approved the lifting of ceiling on total guarantees that may be issued by banks and quasi-banks,” a statement issued on Friday said.
Under existing regulations, banks and quasi-banks are only allowed to guarantee aggregate loans equivalent to 100 percent and 50 percent of their qualifying capital, respectively. The new order, which will still be formalized through a circular, lifts that limit.
A bank may issue a guarantee in favor of another party, instead of a loan. The guarantee issued by the bank means it will assume the obligations of the obtaining party upon the latter’s inability to pay his obligations.
The ceiling, according to the statement, was set “decades ago” and “aimed at preventing banks and quasi-banks from excessive risk taking” characterized by too much loans which their assets may not be able to handle.
“The BSP’s recent review suggested that there was leeway in further liberalizing the limit without putting at risk prudential standards,” BSP said in the statement.
“This is likewise consistent with the policy intent to actively pursue the implementation of lined-up projects under the Philippine public-private partnership (PPP) program,” it added.
Launched in November 2010, PPP is the Aquino administration’s centerpiece economic program aimed at tapping private sector expertise in bridging the country’s infrastructure gap. Since its launch, two projects worth around P12 billion have been already bid out.
In January 2011, BSP relaxed its rules in single borrowers’ limit to support the PPP undertaking. The relaxation will be good for three years and will allow PPP contractors to borrow more from the banks to finance such projects.
“The lifting of the ceiling on total guarantees therefore would be supportive of the said program,” the statement said.
It is also “consistent with the current developments in the regulatory framework of banks and quasi-banks,” it added.
Latest BSP data showed the banks non-performing loan ratio— or the proportion of unpaid loans to lenders’ total loan portfolio— at 2.18 percent as of July, slightly up from 2.06 percent for the first six months.
June 19, 2012, Manila Bulletin
by Lee Chipongian
MANILA, Philippines — Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. has reiterated his call to the banking community to fund major infrastructure projects and release a significant portion of resources to jumpstart economic expansion.
“(I) encourage our banks (to) seriously consider channeling liquidity to productive investments, such as the PPP (public-private partnership) program, instead of simply placing funds in financial instruments or engaging, even indirectly, in activities like shadow banking,” Tetangco told participants of The Asset-FINEX forum in Makati. “Communication lines, roads, bridges and airports… these are the kinds of investments that affect the quality of growth and define our competitiveness.”
Tetangco emphasized the sufficient domestic liquidity system and brushed aside concerns of what might a “deleveraging” in Europe mean to the Philippines.
For one, as the eurozone deleverages, capital funds will shift to the region however if core Europe deleverages absolutely, the BSP chief said this will result to a liquidity squeeze for Asia and the rest of the globe. Capital flows impact exchange rates, interest rates, trading volumes and future demands on currency withdrawals.
“These are not small concerns, as these can quickly become the stimuli for systemic risk. The BSP is thus always watchful,” he said.
Still, Tetangco is fairly confident that there are not enough reasons to start worrying yet.
“As I see it (the) issue of a liquidity squeeze and contraction of trade credits because of deleveraging in Europe is not our primordial concern. The strength of the Philippine banking system at the height of the global financial crisis was precisely the ability to source deposits, create loans while at the same time continuously improving the quality of the credit portfolio.”
“There is always of course that temptation to deploy funds to cover costs,” he added. “Ultimately, it is an issue of credit underwriting for banks. So, I say to our banks, now is not the time to put our avowed strength at risk.”
It continues to be a comfortable period for the financial sector despite the current concerns in Europe and the US. Tetangco said financial stability remains strong and the economy is on the right path to further growth. “Through the crisis, we managed continued real GDP growth because our financial markets were broadly in order. This is why financial stability is now the overarching policy issue. Instead of looking at growth only as a higher number, we need to go beyond the bottom line and the balance sheet.”
