BSP to require banks to submit data on real estate loans

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BSP to require banks to submit data on real estate loans
The data would be used to establish an index designed to help prevent a housing bubble in the property sector

MANILA, Philippines – The Bangko Sentral ng Pilipinas (BSP) is set to start collecting data from banks to help detect risks stemming from the real estate market and prevent a “housing bubble.”

Following the recently issued Circular No. 892, all universal and commercial and thrift banks are now required to submit quarterly reports on residential real estate loans granted.

The reports from banks would provide information for the establishment of a Residential Real Estate Price Index (RREPI) that the BSP intends to launch within the year.

“The bank’s quarterly report on residential real estate loans for RREPI is designed to provide information for the generation of a RREPI, which would provide a valuable tool in assessing the real estate and credit market conditions in the country,” BSP Governor Amado Tetangco Jr stated in the circular.

The construction of RREPI is a first in the Philippines and is expected to provide a valuable tool in assessing the real estate and credit market conditions in the country.  

The availability of data on property prices is one of the information gaps identified in the Group of 20 (G20) report following the global financial crisis.

It is also included in the Special Data Dissemination Standard (SDDS) Plus categories under Financial Soundness Indicators that member countries of the International Monetary Fund (IMF) should adhere to within 5 years from the time a country joins the SDDS.

Required information

For each residential real estate loan granted, respondent banks would be required to provide the following information:

  1. The month the loan was granted/booked
  2. Location of property
  3. Type of property
  4. Type of housing unit
  5. Appraised value of housing unit per square meter
  6. Floor area of the housing unit
  7. Number of floors
  8. Number of bedrooms
  9. Effective age of the housing unit
  10. Appraised value of lot per square meter
  11. Total area of lot
  12. Total appraised value of property
  13. Housing segment
  14. Acquisition cost
  15. Name of developer

Data from banks’ housing loan applications shall cover areas in the National Capital Region (NCR) and areas outside the NCR.

The BSP also said that the monitoring would eventually be expanded to cover other key cities in the country.

The quarterly report should be submitted not later than the 20th banking day from the end of the reference quarter. 

The initial submission, following the issuance of the circular, shall cover the second and third quarter of 2015 and should be submitted on or before December 29.

The submission for the fourth quarter 2015 should follow the prescribed submission on the 20th banking day from the reference quarter. 

Tetangco said banks that fail to submit the quarterly reports would face monetary penalties.

Addressing concerns of a bubble

The RREPI would help the central bank in addressing concerns of a “bubble” in the country’s booming residential real estate sector brought about by the improving purchasing power of Filipinos, BSP said.

The BSP stepped up its watch over the real estate sector in 2012 by ordering banks to disclose more comprehensive reports on their exposures to property industry.

In June 2014, the BSP introduced stricter rules on banks’ real estate exposure to ensure that lenders have enough capital to absorb any potential losses.

The pre-emptive policy measure approved by the Monetary Board required stress tests for banks to determine if their capital would be enough to absorb credit risk that may arise from their exposure to the property sector.

The BSP explained universal, commercial, and thrift banks would need to meet a capital adequacy ratio of 10% of their qualifying capital following the stress test results.

Moreover, universal and commercial banks, along with their thrift bank subsidiaries, will also need to keep a Common Equity Tier 1 level of at least 6% of their qualifying capital.

Standalone thrift banks, meanwhile, are required to maintain a Tier 1 ratio of 6% of their qualifying capital.

Banks that fail to comply would need to provide a formal explanation to the BSP on why they should not be subject to any further remedial action. –

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