By Luz Wendy T. Noble, Reporter
THE CENTRAL BANK is open to extending the higher single borrowers’ limit (SBL) of 30% for banks after it expires by yearend to support economic recovery.
“The BSP (Bangko Sentral ng Pilipinas) is open to extending the 30% SBL to support the country’s recovery for as long as this will not pose a threat to the stability of the financial system,” BSP Governor Benjamin E. Diokno said in a statement.
The SBL was temporarily increased to 30% from 25% previously to encourage lending amid the coronavirus pandemic.
This was supposed to be effective only until March 31. However, the BSP in April extended its effectivity to Dec. 31, 2021.
“The retention of the BSP’s regulatory relief measures including the 30% SBL will depend on our assessment of economic developments and financial conditions,” Mr. Diokno said.
The higher SBL of 30% also covers exposure to borrowings meant for project finance, Mr. Diokno said.
“The BSP adopted a separate SBL for project finance mainly to mobilize private sector funding towards projects that will support the country’s economic recovery efforts and nation building,” Mr. Diokno said.
He said conditions should be met in order to be eligible for the separate SBL for project finance.
It will be eligible if it will finance projects that are in line with the priority programs and projects of the National Government; and standard prudential controls in project finance loans are designed to safeguard creditors’ interests. The bank should also consider its total project finance exposures as complying with internal credit limits.
Mr. Diokno said lenders should gauge their total project finance exposures in managing their large exposures and credit risk concentrations.
In 2018, the Monetary Board approved a separate SBL for special purpose entities that take part in implementing major infrastructure projects under the Duterte administration.
Mr. Diokno is hopeful that relief measures like the higher SBL will boost lending that can in turn spur economic activity.
Bank lending rose by 1.3% year on year in August.
“The BSP relief measures which include increase in the SBL aim to address some issues related to the supply-side of lending. As economic conditions improve, the BSP’s regulatory relief measures will allow banks to lend more to productive enterprises and priority projects,” he said.