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New DOSRI Rules for Government Borrowings

02.24.2006

The BSP is set to issue new rules rationalizing the director/officer/ stockholder/related interests (DOSRI) rules and regulations for government borrowings in government financial institutions (GFIs).  

The new rules provide that loans, other credit accommodations, and guarantees to the National Government (ROP), its departments, agencies, and bureaus including the BSP shall be considered non-risk and not subject to any ceiling.  However, borrowings of government-owned or controlled corporations (GOCCs) and corporations where the ROP, its departments, agencies, and bureaus and GOCCs own at least 20% of the capital stock are considered indirect borrowings of the ROP and are thus subject to the DOSRI ceilings.  Moreover, borrowings of local government units (LGUs) from GFIs  shall not be considered DOSRI credit accommodations.

These amendments were proposed in light of concerns raised about the existing DOSRI regulations which tend to restrict borrowings of the ROP, its departments, agencies, and bureaus, as well as GOCCs in GFIs, such as the Development Bank of the Philippines, Land Bank of the Philippines and Small Business Guarantee and Finance Corporation (SBGFC). 

Under existing rules, borrowings, including guarantees of DOSRI are limited to their respective unencumbered deposits and book value of their paid-in capital contribution in the lending entity. Because of these limitations, GFIs may not be able to adequately service the huge financing requirements of the government.           

The less restrictive regulations on government borrowings will give GFIs greater flexibility in fulfilling their mandates of providing medium and long-term credit facilities for agrarian reform, agriculture, fisheries, small and medium scale industry and export development, and satisfying the financing requirements of the government sector.

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