BSP proposes changes to regulatory relief policy

The Bangko Sentral ng Pilipinas (BSP) is seeking to amend its regulatory relief policy for banks in order to provide them with more support during calamities and disasters.

“Consistent with the aim of strengthening banks’ operational resilience through business continuity or disaster recovery measures, the BSP is amending the regulatory relief policy for banks by providing additional regulatory measures,” it said in a draft circular.

“The BSP recognizes the vulnerability of the Philippines to both natural and human-induced hazards which can lead to certain areas being declared under a state of calamity.”

These amendments seek to make regulatory relief measures more uniform and systemic, as well as boost banks’ capacity to bounce back from natural calamities.

The draft circular proposes to formally adopt several relief measures that were already given to banks affected by Tropical Storm Kristine and Super Typhoons Leon, Ofel and Pepito, which were introduced in January.

Under the draft rules, banks may avail themselves of relief measures within one year from the onset of a calamity. This could be earlier than the date of the official declaration of a state of calamity, it added.

Banks may also be granted a temporary grace period for loan payments and a temporary exclusion from past due and nonperforming loan (NPL) computations.

“Banks may grant borrowers in affected areas a grace period of up to six months for loan repayments, which may start from the inception date of the calamity,” it said.

“Loans extended to affected borrowers may be temporarily excluded from past due and NPL computations from one year from the inception date of the calamity.”

The BSP also included in the draft circular some interventions that were first implemented during the coronavirus disease 2019 (COVID-19) pandemic.

These include easing the identification requirements for households or micro-businesses in affected areas; relaxation of notification requirements related to changes in banking days and hours as well as temporary closure of bank branches and branch-lite units.

For example, branches that must temporarily close due to hazards are exempt from notification requirements.

Banks may also defer the opening of approved branches or branch-lite units in affected areas for up to three years.

Meanwhile, the draft circular also proposes a staggered booking of impairment losses.

“Impairment losses from banks’ own physical assets, including bank premises and equipment, due to hazards may be recognized over a three-year period, subject to BSP evaluation and approval,” it said.

“Similarly, the three-year period is also proposed to apply to the staggered booking of credit loss allowances.”

Agricultural loans

The central bank is also introducing relief policies specifically for the agriculture sector.

“Meanwhile, since the agricultural sector is usually affected by climate-related hazards, the BSP is proposing a standardized forbearance measure covering agricultural loans,” it said.

“Loan payments for agricultural borrowers may be deferred, with repayment terms adjusted based on crop cycles and other relevant factors,” it added.

For example, the deferment period for loans related to the production of palay and corn is set at six months; while those for other short-term crops is at seven months, sugarcane at 12 months and cassava at 14 months.

The proposed rules also detail guidelines on the grace period for rediscounting obligations.

“Rediscounting banks may apply for a 60-day grace period to settle the outstanding rediscounting obligations with the BSP as of the inception date of the calamity.”

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said that improvements in the relief measures are a welcome development.

“The Philippines is one of the hardest-hit countries by natural calamities in a given year,” he said.

“So, a framework on regulatory relief measures as a stop-gap measure (will help) better respond to the adverse effects on some borrowers, though transitory in nature until they are back on their feet once supply chains and business transactions normalize.” — L.M.J.C. Jocson