The Philippines: ‘BBB’ funding excluded from loan limit

• THE central bank’s mandated limit on big banks’ real estate loans will not include loans and securities that will finance public infrastructure projects, in a bid to boost the government’s “Build, Build, Build” (BBB) program.
• Circular No. 1093 signed by Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno raised the limit on real estate loan exposure to 25% of banks’ total loan book from the current 20%, a move seen to unleash PHP1.2tr in additional liquidity for real estate lending.
• “Real estate exposures shall not include loans and investments in debt and equity securities the proceeds of which are used to finance infrastructure projects for public use…,” the circular read.
• BSP Deputy Governor Chuchi G. Fonacier said in a text message the provision will “support funding for the Build, Build, Build program of the government.”
• The BBB program currently includes 92 infrastructure projects worth PHP4.4tr.
• In the circular, BSP said a real estate stress test (REST) will be done to gauge the bank’s exposure to commercial real estate loans, specifically to individual households, sole proprietorships, land developers and construction companies.
• The prudential limit will also cover loans extended to corporate borrowers with real estate-related loans such as brokers, lessors, property management companies, and holding companies, among others.
• “A universal/commercial bank which does not meet either or both the REST limits shall incorporate assessment of risks from this exposure in its internal capital adequacy assessment process (ICAAP),” it said.
• The BSP has earlier said the new guidelines will exclude residential real estate loans to individuals for own occupancy and foreclosed real estate property.

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