The Monetary Board, the policy-making body of the Bangko Sentral ng Pilipinas (BSP), recently approved a separate single borrower’s limit (SBL) for infrastructure and/or development projects undertaken under the Public-Private Partnership (PPP) Program of the government. Under the new guidelines, banks can extend the equivalent of up to 25% of their net worth as loans, credit accommodations and guarantees for infrastructure projects covered under the PPP program.
A prudential feature included in the new guidelines is that the Director General of the National Economic Development Authority (NEDA) must certify that a particular infrastructure project falls within the PPP program. Only those projects with such certification qualify for the separate SBL provided under the new BSP guidelines.
The separate SBL, however, is being provided within a limited window of three (3) years from the effectivity of the said regulation. Loans, credit accommodations and guarantees based on the contracted amount as of the end of the 3-year period shall not be increased but may be reduced and once reduced, said exposures shall not be increased thereafter.
Recognizing the large amounts involved in infrastructure finance, banks are required to provide the BSP with a plan for managing the credit risk concentration arising from such exposures. Specifically, the resulting credit concentration shall be documented and fully considered by the banks under their Internal Capital Adequacy Assessment Process (ICAAP).