BSP provides relief to banks in El Niño-hit areas

Chris Schnabel

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BSP provides relief to banks in El Niño-hit areas
Due to severe drought conditions affecting several provinces, borrowers in affected areas will have difficulty paying their loans, the BSP says

MANILA, Philippines – The Bangko Sentral ng Pilipinas (BSP) has decided to lend a hand to banks in provinces struggling with the El Niño phenomenon by exempting them from certain requirements.  

In a statement released on Thursday, May 19, the BSP said it “is granting regulatory and rediscounting relief measures to banks and non-bank financial institutions with quasi-banking functions (NBQBs) with head offices and/or branches located in areas affected by the El Niño phenomenon.”

Due to severe drought conditions affecting several provinces, borrowers in the affected areas could face difficulty paying their loans, the BSP said, adding that “these circumstances warrant immediate response.”

“By providing regulatory relief,” the BSP explained, “these financial institutions will be able to provide debt relief to their borrowers.”

Officially approved on May 13, the relief measures include:

Thrift banks, rural banks, cooperative nanks, and NBQBs

  1. Exclusion of the outstanding loans of borrowers in the affected areas from the computation of past due ratios provided these are restructured or given relief
  2. Reduction of the 5% general loan loss provision to 1% for restructured loans of borrowers in the affected areas
  3. Non-imposition of penalties on legal reserves deficiencies of thrift, rural, cooperative and NBQBs with head office and/or branches  in the affected areas
  4. Moratorium on monthly payments due to BSP for banks with ongoing rehabilitation programs
  5. Subject to BSP approval: booking of allowance for probable losses on a staggered basis over maximum of 5 years for all types of credits extended to individuals and businesses directly affected areas by the El Niño phenomenon

Rediscounting banks

  1. Grant of a 60-day grace period to all rediscounting banks in the affected areas to settle the outstanding rediscounting obligations as of declaration date of a state of calamity with the BSP 
  2. Allow banks to restructure with the BSP, on a case-to-case basis, the outstanding rediscounted loans of borrowers affected by the El Niño phenomenon 

The central bank specified that the affected areas are those which have been or may be declared as under a state of calamity by the National Disaster Risk Reduction and Management Council (NDRRMC) or the local sanggunian (council).

These measures will be in effect for a period of one year from the date of declaration of a state of calamity, and covered by additional specific and other prudential conditions, it said.

The current El Niño phenomenon, which is estimated to be the strongest in 65 years, has already led to deadly riots and has been a severe drain on the agricultural sector. 

“These past two quarters, it was the impact of El Niño that considerably reduced agricultural output, similar to the 1998 episode,” Socioeconomic Planning Secretary Emmanuel Esguerra said at the briefing on the country’s first quarter economic growth also held on May 19.

While the economy surged to 6.9% growth in the first quarter of the year, the agriculture sector contracted by 4.4% in the same period. –

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