BSP Imposes Specific Ceilings on Bank Lending

BSP Imposes Specific Ceilings on Bank Lending to its Subsidiaries and Affiliates

The Monetary Board (MB) approved on January 11, 2007 specific ceilings on a bank’s/quasi-bank’s lending to its subsidiaries and affiliates.

Under the revised rules, loans, other credit accommodations and guarantees granted to each subsidiary or affiliate shall be limited to 10 percent of the net worth of the lending bank/quasi-bank, with a sub-limit of 5 percent of net worth if unsecured. Moreover, there will be a 20 percent of net worth aggregate limit on total loans, other credit accommodations and guarantees that may be granted to all subsidiaries and affiliates of the lending bank/quasi-bank.

Furthermore, all unsecured loans, other credit accommodations and guarantees to subsidiaries and affiliates of banks/quasi-banks shall continue to be fully deducted from the capital accounts for purposes of calculating both the capital adequacy ratio (CAR) and net worth of bank/quasi-bank concerned for regulatory purposes.

The revised rules take effect on April 10, 2007 upon the expiration of the transition period provided for under BSP Circular No. 532.