The Monetary Board has decided to consider the exclusion of loans secured by US Treasuries and other premier securities issued by central governments of foreign countries.
BSP deputy governor Alberto V. Reyes told reporters over the weekend that the MB has agreed to relax its SBL rules that, at present, only exclude loans secured by Philippine Treasury notes and other Philippine government securities.
"Since government securities have the full faith and credit of the republic, loans secured by these instruments are considered non-risk so they are excluded when banks compute a borrower’s SBL," Reyes explained.
However, Reyes said there are also loans secured by instruments issued by other sovereigns, specifically top-tier sovereign issues that essentially put these loans at par with non-risk loans secured with Philippine government securities.
Reyes said the MB is willing to consider the exclusion of other loans from the computation of a client’s SBL, provided the sovereign securities used to secure them have been given the highest credit rating by at least two internationally-accepted credit rating agency.
According to Reyes, the clamor for the exclusion came from foreign banks that want some relaxation of the single-borrower rule that puts a cap on the amount that banks are allowed to lend to a single borrower.
The BSP has noted an increase in bank lending but the clamor for the limited relaxation of the central bank’s SBL rule is seen as an indication that banks are still risk-averse, lending only to well-known clients with flawless track record but whose borrowings may have been tipping the single borrower limit.
The BSP reported that total lending by commercial banks grew by three percent in the first four months this year to P1.46 trillion, from P1.41 trillion in the same period last year, mostly to the agriculture, fisheries, and forestry sector.
Based on month-on-month performance, however, bank lending in April was slower than the 3.2-percent growth in March and 4.4-percent growth in January and February.
The BSP data show that 55.1 percent of loan demand came from the agriculture, fisheries and forestry sector while the community, social and personal services, as well as the wholesale and retail trade sectors accounted for a combined 28.3 percent of total loans.
The manufacturing sector, meanwhile, accounted for 26.3 percent of total loans while the electricity, gas and water sector took 4.8 percent.
The BSP attributed the increase in demand to the sustained low interest rate environment, making it cheaper for corporate borrowers to source their financing requirements this year than the past year.
From a low of roughly 18 percent to a high of nearly 20 percent in end 2000, banks have been lending money at interest rates of 8.9 percent to 10.8 percent.
The BSP data also show that lending to the construction sector continued its downward trend, declining by 18.7 percent. Similarly, drops in borrowed funds were noticed for the mining and quarrying; transportation, storage and communication; and financial institutions, real estate and business services.