BSP reminds banks to be cautious in granting loans

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NB FILE PHOTO

BANKS are expected to be cautious in granting credit amid pandemic by reviewing their borrowers’ backgroundsFiand assessing their loan portfolio, said the Bangko Sentral ng Pilipinas (BSP).

Memorandum No. M-2020-061 signed by BSP Deputy Governor Chuchi G. Fonacier on August 3 defined the requirements for the measurement of expected credit losses (ECL) by banks and the processing of relief measures regulations granted during coronavirus disease 2019 (Covid pandemic19.

“All BSFIs (financial institutions supervised by the BSPs) should be guided by the prudential expectations regarding the measurement of ECL under the Philippine Financial Reporting Standards (PFRS) 9 given the uncertainties caused by the COVID pandemic- 19 “, said Ms. Fonacier.

Ms Fonacier said the rules were in part based on guidance from the Basel Committee on Banking Supervision and the International Accounting Standards Board.

BSP has said it expects BSFIs to assess the financial capacity of their borrowers when granting credit.

“Decisions to issue new loans or change the terms of existing loans must be based on a sound assessment of the Fifinance proFithe borrowers, ”says the issue.

Republic Law 11469 or the “Bayanihan to Heal As One Act” told lenders to impose a grace period for loan payments with due dates as part of the Enhanced Community Quarantine and the modiFiperiod of reinforced community quarantine. This grace period was extended as the lockdown dragged on.

Ms Fonacier said earlier that banks continue to grant loan payment extensions on a case-by-case basis after the mandatory grace period.

The BSP said in the guidelines that payments not due during the mandatory grace period should not lead to the classification of loans as past due or non-performing.

He said it is the duty of the BSFI to assess whether borrowers are facing temporary liquidity flpressure or serious loan repayment problems.

“The granting of relief measures in the form of payment holidays, deferral of loan payments and other similar schemes which effectively moving the due date of the loan payment should not automatically be taken as a signiFicannot increase credit risk, ”he said.

Arrears represented 5.24% of the banking sector’s loan portfolio in May, higher than 3.81% in April, according to data from the BSP. At the same time, the gross ratio of non-performing loans to banks rose to 2.43% in May from 2.31% in April.

Meanwhile, the PASB said lenders who took advantage of some regulatory relief measures amid the pandemic, including the exclusion of eligible accounts from delinquent loans and bad loans as well as the phased recognition of provisions. for credit losses, will have to report the data on this subject to the BSP.

“This is about facilitating the generation of sector statistics and providing the PASB and the public with information on the true health of the banking system,” he said.

These lenders should continue to recognize accounts eligible for delinquent and nonperforming loans in their FiReports on the financial reporting software package and capital adequacy ratio, the PASB said. – LWTN

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