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Monetary Board Strengthens Oversight of Banks' Real Estate and Project Finance Exposures


The Monetary Board approved enhancements to the prudential reporting requirements in order to strengthen oversight of banks’ real estate and project finance exposures. The reportorial enhancements form part of BSP’s macroprudential toolkit and are being deployed to sharpen the BSP’s assessment of banking system exposures to the property sector.

Under the new guidelines, covered banks shall report granular information on their real estate loans to mid- and high-end housing units, in addition to socialized and low-cost housing.  Moreover, covered banks shall now report commercial real estate loans as to the underlying commercial project being financed such as residential units, office buildings, malls and factory/plant facilities.

Universal and commercial banks (U/KBs) shall also be required to submit a new Report on Project Finance Exposures which shall include information in terms of type of infrastructure project and project phase.  This report will enable the BSP to obtain a better grasp of the extent and quality of U/KB exposures to project finance, especially since demand for project finance is expected to increase and gain further traction as the country moves towards achieving its infrastructure goals. 

The new reports shall be implemented starting with the quarter-ending 30 June 2018.  Prior to this, a pilot run submission shall be made for the reporting period ending 31 March 2018.  For the pilot run submission of the revised Expanded Report on Real Estate Exposures for the quarter-ending 31 March 2018, this shall be made in parallel with the reportorial template of the Expanded Report on Real Estate Exposures issued under Memorandum to All Banks M-2012-046 dated 21 September 2012. 

The enhancements to banks’ disclosure requirements aim to further dimension risks faced by banks on their real estate and project finance exposures.  A deeper understanding of these exposures will improve the quality of BSP’s financial surveillance process as well as enable the BSP to adopt calibrated policy measures that shall be targeted only towards areas that warrant supervisory action.  

These measures supplement the existing regulatory framework governing real estate exposures of banks.  This framework consists of the real estate loan limit of 20 percent of total loan portfolio, net of interbank loans, as well as the real estate stress test limits which were adopted in pursuit of the BSP’s objective of fostering financial stability.

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