Interaksyon.com, 20 December 2012
MANILA – The Bangko Sentral ng Pilipinas (BSP) has extended by another 3 years a rule exempting public-private partnership (PPP) project loans from a ceiling that banks should observe when lending to anyone.
This after the Aquino administration failed to accelerate its PPP Program halfway through its term, with only 2 projects awarded to the private sector out of 10 projects that President Benigno Aquino III launched in November 2010.
In a statement, the BSP said it would extend to December 28, 2016 the separate single borrowers’ limit (SBL) for PPP loans.
Before the Aquino administration launched its PPP Program, the BSP required banks to limit to 25 percent all loans or credit accommodations given to any single borrower.
In December 2010, the BSP issued Circular No. 700, creating a separate 25 percent SBL on loans granted for PPP projects recognized by the Office of the Socioeconomic Planning Secretary. This regulatory leeway will expire by the end of this year.
“Due to the long and complex process involved in the awarding of PPP projects, very few projects were awarded subsequent to the said BSP issuance,” the central bank said.
The BSP said the extension is aimed at encouraging banks to participate in the PPP Program, especially for projects in the pipeline.
The SBL is meant to minimize the risk of bank failure arising from too much exposure to any single borrower.
This, along with a separate rule that limits the amount of loans or credit accommodations that banks grant to their directors, owners, shareholders and related interests, are among the safeguards the BSP put in place in the wake of the Asian financial crisis of 1997-1998.
During the Asian crisis, banks were saddled with too much non-performing loans, discouraging them from further lending. The resulting dearth in credit led the economy to contract and businesses to shed jobs.
