The Monetary Board (MB), the policy-making body of the Bangko Sentral ng Pilipinas (BSP), decided on 7 September 2006 to exempt from the ceilings on unsecured loans to directors, officers, stockholders and their related interests (DOSRI) loans, other credit accommodations and/or guarantees granted by government banks to government-owned or controlled corporations (GOCCs) for the financing of priority infrastructure projects in pursuance of the National Government’s Medium-Term Development Plan and the Medium-Term Public Investment Program. As a safeguard, the Secretary of Socio-Economic Planning is certifying to the priority status of the project.
Under existing regulations, total secured and unsecured DOSRI loans to GOCCs shall not exceed the individual ceiling which limits the total outstanding loans to each of the bank’s DOSRI to an amount equivalent to their respective unencumbered deposits plus the book value of their capital contribution in the lending bank; and the aggregate ceiling which limits total outstanding loans to all DOSRI to an amount equivalent to 15 percent of the bank’s total loan portfolio or 100 percent of net worth, whichever is lower.
In addition to these limits, unsecured loans to individual GOCC must not exceed 30 percent of the outstanding loans, other credit accommodations and/or guarantees to that GOCC, while total unsecured loans to all GOCCs must not exceed the lower of 30 percent of the aggregate DOSRI ceiling or 30 percent of all outstanding DOSRI loans.
Because of these limitations, government banks have found it difficult to fully fulfill their mandates to provide the financing requirements of priority sectors of government.
Under the amended DOSRI rules, loans granted by government banks to GOCCs for financing the government’s priority infrastructure projects, such as the construction or rehabilitation of farm-to-market roads, bridges, railways, airports and seaports, are now excluded from the computation of the ceilings on unsecured DOSRI loans. However, to address valid risk management concerns, such unsecured DOSRI loans are still subject to compliance with the individual and aggregate ceilings on DOSRI loans. Moreover, unsecured DOSRI loans will still be deducted from capital accounts for purposes of computing the capital adequacy ratio (CAR).