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MB Approves Guidelines on Bank Loans

06.12.2003

The Monetary Board approved the issuance of a Circular which would govern the grant by banks of loans and other credit accommodations.  The Circular would require banks to ascertain that the borrowers are financially capable of fulfilling their commitments to the bank.  For this purpose, banks should also obtain adequate information on the credit standings of their borrowers

In addition to the usual information about the borrower, banks may require the submission of a borrower's statement of assets and liabilities and of its income and expenditures.  Banks shall also require a copy of the income tax return and, if the borrower is engaged in business, a copy of the borrowers' latest financial statements as submitted for taxation purposes.

Should the documents submitted by the borrower prove to be spurious or incorrect in any material detail, the bank may terminate the loan and can demand immediate repayment.  Violation of the Circular shall be subject to the sanctions provided for under the Bangko Sentral Charter.

The Circular clarifies that microfinancing loans and loans to small and medium enterprises shall be governed by a separate Circular.

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