The Bangko Sentral ng Pilipinas (BSP) has moved to allow lenders in areas affected by the drought caused by the El Niño phenomenon to provide debt relief to their borrowers by granting regulatory and rediscounting relief measures to banks and other financial institutions.
“Due to severe drought conditions affecting several provinces, borrowers in the affected areas could face difficulty in paying their loans,” the central bank said late Thursday.
These circumstances warrant BSP’s immediate response through the grant of regulatory and rediscounting relief measures to banks and non-bank financial institutions with quasi-banking functions (NBQBs) with head offices or branches located in the areas which have been or may be declared by the National Disaster Risk Reduction Management Council or the local government, upon the recommendation of the Regional or Local Disaster Risk Reduction Management Council as under a state of calamity, the BSP said.
By providing regulatory relief, the BSP said these financial institutions would be able to provide debt relief to their borrowers.
Approved on May 13 by the Monetary Board, the central bank said for thrift banks/rural banks/cooperative banks and NBQBs, the temporary relief measures were the exclusion of existing loans of borrowers in affected areas from the computation of past due ratios, provided these are restructured or given relief; reducing the 5-percent general loan-loss provision to 1 percent for restructured loans of borrowers in the affected areas; and non-imposition of penalties on legal reserves deficiencies with head office or branches in the affected areas.
The relief also include moratorium on monthly payments due the BSP for banks with ongoing rehabilitation programs; and subject to BSP approval, booking of allowance for probable losses on a staggeredbasis over maximum of five years for all types of credit extended to individual and businesses directly affected by the phenomenon.
For all banks, the regulatory relief allows banks to provide financial assistance to their officers and employees who were affected by the calamity, including assistance that may not be within the scope of the existing BSP-approved Fringe Benefit Program.
For all rediscounting banks, the relief includes the granting of a 60-day grace period to settle the outstanding rediscounting obligations as of declaration date of a state of calamity with the BSP; and allowing banks to restructure with the BSP, on a case-to-case basis, the outstanding rediscounted loans of borrowers affected by El Niño.
“These measures will be in effect for a period of one (1) year, reckoned from the date of declaration of a state of calamity, and covered by additional specific and other prudential conditions,” the BSP concluded.