Business World – Top Story, 20 December 2012
THE CENTRAL BANK has granted a three-year extension to the special single borrower’s loan (SBL) limit for public-private partnership (PPP) projects.
The special SBL limit was initially approved in December 2010, allowing banks to lend as much as 25% of their net worth for loans, credit accommodations and guarantees related to financing PPP deals. This was on top of the normal SBL limit of 25% for other loans.
The limit for the PPP program was due to expire on Dec. 28, 2013. “However, due to the long and complex process involved in the awarding of PPP projects, very few were awarded … Several PPP projects are still in the pipeline,” the central bank noted.
The extension keeps the window open until Dec. 28, 2016.
Loans, credit accommodations and guarantees contracted until that date can no longer be increased after. These may be reduced but once done cannot be increased again.
The central bank hopes the longer period will encourage the financial sector to participate in the government’s PPP programs, especially with groundbreaking yet to start.
This follows another BSP move in October to lift the ceiling on loan guarantees issued by banks and quasi-banks to spur borrowing, particularly for the PPP program.
Large-scale investments typically need guarantees — agreements extended by banks and quasi-banks to pay a borrower’s debt in case of default.
Banks are currently mandated to keep their total guarantees capped at 100% of their qualifying capital, while quasi-banks must keep theirs at a maximum of 50% of their net worth.
The PPP initiative, launched in late 2010, is a centerpiece of the Aquino administration’s economic agenda. It hopes to encourage private sector participation in the development of big-ticket infrastructure projects.
The program has been hit by delays, though, and to date only two projects have been awarded: the P1.96-billion Daang Hari-South Luzon Expressway Link Road and a P16.42-billion project to build 9,300 classrooms in Luzon. — Diane Claire J. Jiao
