MANILA -- Bangko Sentral ng Pilipinas' (BSP) policy-making Monetary Board (MB) has approved a separate single borrower's limit (SBL) for special purpose entities (SPEs) that will take part in the "Build, Build, Build" program, in an apparent bid to lend financial support to government's ambitious infrastucture program.
To date, banks and quasi-bank's (QBs) have SBL of 25 percent of their networth.
With the latest MB decision, SPEs are "given their own separate SBL in consideration of the independence they usually enjoy under project finance schemes," the BSP said in a statement Thursday. "Under these schemes, SPEs are ring-fenced by appropriate legal structures, operational set up, and controls so that assets and cash flows of SPEs remain separate from those of their sponsors, shareholders, and other related parties," it said.
Asked whether the SBL of these SPEs will also be 25 percent under the amended rule, BSP Governor Nestor A. Espenilla Jr. answered in the affirmative. "Yes, like a separate entity," he said, adding that the new rule will take effect 15 days after the publication of the MB decision.
The statement explained that the Board's decision "is premised on banks/QBs' understanding of risks of such exposures. It said loans to be extended to these specific entities "shall be subject to certain conditions to ensure effective risk monitoring and management" and these loans should be in line with the government's priority programs and projects.
Standard prudential controls like pledges of borrowers' shares, assignments of borrowers' assets, revenues, cash waterfall accounts and project documents must be ensured by the banks, it said.
"To curb excessive credit risk-taking, banks/QBs must also take into account, their total project finance exposures in managing large exposures and credit risk concentrations," it said. It was stressed that these prudential controls should also cover loans extended by banks and QBs to their SPE subsidiaries and affiliates involved in project finance activities.
The BSP also said that starting June 30 this year banks need to submit "more granular reports on their real estate exposures including project finance loans. This will aid the BSP in crafting more informed and calibrated policy decisions in areas that require careful supervisory action," it added. (PNA)
