BSP plans to relax policy on credit exposures of state banks to national government


LA Bangko Sentral ng Pilipinas is working on new guidelines to strengthen the “capacity of public banks to respond” to government funding needs, according to BSP Governor Benjamin E. Diokno.

During a virtual press conference, Diokno said the improved policy will provide that unsecured credit exposures denominated in pesos to the National Government (NG) will be excluded from deductible items for the purpose of calculating the minimum capital requirement.

“The improved policy will also allow government banks to free up and reallocate capital to help priority sectors affected by the Covid-19 pandemic, in support of NG’s broader economic recovery efforts,” said Diokno.

Government bank credit accommodations in NG are considered transactions of directors, officers, shareholders and their related interests (Dosri).

Under existing BSP regulations, these credit facilities are generally unsecured and deducted from capital.

The new guidelines will “align” these regulations by clarifying that NG exposures are “risk-free assets” of public banks and should not be charged against their capital.

Diokno said the improvements should have a positive impact on government banks’ adjusted capital and capital adequacy ratio, even with their current low exposure to NG lending.

The BSP implements minimum capital ratios of 6% Common Equity Tier 1 (CET1) ratio, 7.5% Tier 1 ratio and 10% Total Capital Adequacy (CAR) ratio.

The BSP’s minimum capital requirement is stricter than the 8% minimum capital required as a general rule by the Bank for International Settlements.


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