The BSP wanted to amend single borrower’s limit rules
BSP — The Bangko Sentral ng Pilipinas was proposing changes to the rules governing single borrower’s limit in terms of credit exposure and minimum capital.
Manila Bulletin reported that the central bank wanted to amend the single borrower’s limit (SBL) and the definition of capital “for purposes of determining compliance with various prudential limits and requirements”.
In the draft circular, credit exposure limited to single borrower’s limit will have new definitions of net worth which referred to minimum required capital. The changes covered guarantees, credit risk transfer, and credit derivatives.
According to the central bank, capital in SBL rules will be the same as combined capital accounts, unimpaired capital and surplus, and net worth.
The new definition included unimpaired paid-in capital, retained earnings, paid-in surplus, and undivided profits when determining minimum required capital.
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The central bank wanted to add to capital deposits for stock subscription as equity, and other capital instruments that were paid-in, with at least 5 years maturity, redeemable, and can be converted to common shares or written off.
On the other hand, the draft circular will deduct from capital treasury stock, outstanding unsecured credit accommodations, unbooked allowance for probable losses, and DOSRI (directors, officers, stockholders and their related interests).
Currently, the central bank implemented a higher SBL of 30% until end-December this year, part of credit-related regulatory relief measures for all BSP supervised financial institutions (BSFIs) hit by the pandemic health crisis.
The SBL was 25% of a bank’s unimpaired capital before the pandemic. From time to time, the central bank increased the SBL cap or granted separate SBL but as a general rule, non-banks and banks should spread their risks.
According to a report, the draft circular amending the definition of capital for SBL was currently being circulated among BSFIs for feedback and comments until November 12.
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