MFI guarantees exempt banks from BSP loan cap

The Bangko Sentral ng Pilipinas (BSP) has provided banks with elbowroom in financing priority projects with its directive excluding loans guaranteed by Multilateral Financial Institutions (MFIs) from the loan cap to subsidiaries and affiliates.

“(This latest decision by the Monetary Board) will enable concerned banks to increase their loan budget available to high priority projects such as infrastructure that attract MFIs guarantees,” BSP Governor Nestor Espenilla Jr.. said.

The BSP, in a statement, identified the MFIs as the International Finance Corp. (IFC), the lending arm of the World Bank (WB); the Manila-based Asian Development Bank (ADB), and the Credit Guarantee and Investment Facility.

The latest MB decision “aims to promote a level-playing field for bank borrowers through consistent application of regulatory limits on credit.”

Currently, MFI-guaranteed loans are exempted from the Single Borrower’s Limit (SBL) and the cap loans to Director, Officer, Stockholder and their Related Interests (DOSRI).

The statement explained that exclusion of MFI guaranteed-loans is targeted to “recognize that the mitigation of credit risk similarly applies to all MFI-guaranteed loans regardless of whether the borrower is a third party, DOSRI, or a subsidiary or affiliate of the bank.”

“The rationalization of prudential measures is expected to result in greater flexibilities in financing the country’s large-scale projects for developmental purposes. In addition, the credit risk mitigant offered by MFIs will provide added cushion for the credit risk exposures of the banking system,” it added.