BSP Allows Large Banks to Grant More Property Loans to Borrowers
The Bangko Sentral ng Pilipinas (BSP) grants large banks the authority to extend more property loans to their borrowers.
On Thursday, August 20, BSP Governor Benjamin Diokno announced that the Monetary Board approved to raise the allowed real estate loan limit for universal and commercial banks to 25%, 5% larger from the previous 20% limit.
Diokno states, “[The measure] aims to support growth in productive sectors of the economy amid the COVID-19 situation, including real estate activities”.
The new guidelines require large banks with subsidiary thrift banks (TB) to comply with BSPs’ real estate stress test (REST) limits once they assume the 25% write-off of real estate exposures on a solo and consolidated basis.
The methodology for computing a bank’s REST protocols was also revised to exclude residential real estate (home) loans to individuals used for residence and foreclosed real estate property.
Additionally, the BSP also requires subsidiary banks and stand-alone thrift banks to have a minimum capital of adequacy ratio and common equity Tier 1 ratio of 10% and 6% percent, respectively.
The REST tests are implemented as soft limits for banks to maintain exposures to real estate so long as such banks can demonstrate their abilities to manage risks.