Lenders’ clearing, settlement accounts excluded from borrower’s limit rule

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The Bangko Sentral ng Pilipinas (BSP) has excluded the exposure of banks and quasi-banks in clearing and settlement accounts from the single borrower’s limit (SBL) rules to promote the smooth function of financial markets.

Under the SBL rule, the total amount of loans, credit accommodations and guarantees that may be extended by a bank to any person, partnership, association, or corporation should not exceed 25 percent of the lender’s net worth.

“It is more connected to promoting the efficiency of the payment system,” Bangko Sentral Nestor Espenilla Jr. said in separate interview with reporters in Makati City on Friday.

The central bank said that the distinct nature of clearing and settlement accounts as mere “pass through” for short-term payment transactions entails relatively low credit exposure to the clearing and settlement bank.


In the course of settlement, accounts sometimes exceed the SBL. But the break is often temporary, Espenilla noted.

“So if you have to put an SBL on that, it will hamper the clearing and settlement process. That’s all that it intends to do,” Espenilla said.

Clearing and settlement accounts must be maintained with a designated local settlement bank, or a foreign settlement bank, to be eligible for to skirt the SBL limit.

Lenders must have an agreement with a settlement bank, stipulating that the account has been opened and maintained exclusively for short-term payment transactions.

They must have an internal control mechanism covering settlement transactions, and the accounts must be properly segregated, the BSP said.

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