Malaya, 21 December 2012
The Monetary Board, to accommodate funding for PPP projects still on the drawing board, has decided to extend for three years the provision allowing a separate single borrower’s loan limit of 25 percent to those undertaking infrastructure and/or development projects under the Public-Private Partnership (PPP) Program.
At present, the government has $1.8 billion (P91.27 billion) worth of PPP projects in the pipeline.
The original provision calls for a three-year period that started on December 28, 2010. With the extension, the window will be opened until December 2016.
The special consideration for PPP projects means that should a bank have, say, a P100 billion capital, it can accommodate PPP loans of P25 billion outside of the P25B cap reserved for other ventures.
The Monetary Board said that loans, credit accommodations and guarantees based on the contracted amount as of December 28, 2016 “shall not be increased but may be reduced and, once reduced, said exposures shall not be increased thereafter.”
“The extension of another three years for the separate 25 percent 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 that are still in the pipeline,” the Monetary Board said.
In December 2010, the BSP issued Circular No. 700 allowing a separate SBL for PPP projects for a period of three years.
However, the Monetary Board said that due to the long and complex process involved in awarding PPP projects, very few projects were awarded subsequent to the BSP issuance.
“Several PPP projects are still in the pipeline,” the MB said.
BSP governor Amando Tetangco said that the separate SBL limit “is intended to allow banks to more actively participate in the PPP program but without setting aside prudential consideration.”
Mindful of the added risks that such larger exposures may generate, Tetangco said that banks would be required to submit their plan to address any resulting credit concentration risks.
“This plan should be considered by the banks in their internal assessment of capital adequacy in relation to their overall risk profile and operating environment,” Tetangco said.
At the moment, the BSP restricts each bank’s exposure to a single borrower to only 25 percent of its capital.
The SBL concept is specified in the General Banking Act (GBA) of 1948.
The central bank last increased the ceiling from 20 percent in 2004.
PPP is the flagship program of the Aquino administration, which is to be by 2016. Under the program, various government agencies would come up with a list of projects that would be undertaken in partnership with the private sector as well as possible funding by multilateral lenders including the World Bank, the Asian Development Bank, the Japan Bank for International Cooperation, among others.
In answering the call of the government to invest in PPP, business groups wanted the BSP to make exemptions to the 25 percent cap rule, specifically conventional or direct lending for capital-intensive projects like infrastructure and power.
Several banks, through the Bankers Association of the Philippines (BAP), have held a series of dialogues with the BSP to increase the ceiling to be able to address the borrowing requirements of large companies such as diversified conglomerates San Miguel Corp. and First Pacific’s Metro Pacific Investments Corp. that have ventured into capital-intensive tollway business.
