Focus on borrowers’ ability to pay

Borrowers’ cash flows and their ability to pay must be the primary focus of a lender when giving out a loan rather than relying heavily on collateral, according to the amended regulations governing credit-risk taking activities of banks and quasi-banks of the central bank.

The Monetary Board revision of the credit regulation framework is in line with risk-based principles as well as the efforts of the central bank to be in synch with global standards, particularly Basel 3, BSP Governor Amando Tetangco Jr. said in an email to reporters.