The Monetary Board, the policy-making body of the Bangko Sentral ng Pilipinas (BSP), recently approved an additional single borrower’s limit (SBL) of 15% for exposures of banks to oil companies. The additional 15% SBL which is in addition to the 25% regular SBL shall only be available for borrowings of oil companies to finance oil importation.
The BSP believes that the oil industry is a business vital to the national interest in order to ensure adequate supply of oil and other petroleum products in the country. The additional 15% SBL for oil companies shall, however, be allowed only for a non-extendable period of two (2) years. The ultimate objective is to encourage oil companies to gradually resort to the capital markets for their funding needs. Loans, credit accommodations and guarantees outstanding as of the end of the two (2)-year period and in excess of 25% of the lending bank’s net worth shall not be increased but may be reduced and once reduced, said exposures shall not be increased beyond the regular 25% SBL.
As a control measure, lending banks shall be required to provide the BSP with a plan for managing the credit risk concentration arising from such exposures to oil companies. The resulting credit concentration shall be considered and documented in the banks’ internal assessment of capital adequacy relative to their overall risk profile and operating environment.