MB okays amendment on loan write-offs

The Monetary Board (MB), the policy-making body of the Bangko Sentral ng Pilipinas (BSP), has approved the amendment on the write-off of loans, including microfinance loans.

In approving the said amendments, the MB said this decision would expedite write-offs and emphasize banks’ responsibility in writing-off loans.

The MB explained that the write-off of microfinance loans no longer requires that the loans are 91 days or more past due.

Loans that are past due and determined by the board of directors to have become worthless, may be written-off against allowance for probable losses.

Existing regulations of the BSP authorize the board of directors of banks to approve write-offs of loans but banks are required to notify the monetary authority 25 days prior to the write-off.

The approved amendment would enable banks to write-off the loans without prior notice requirement.

Instead, banks are required to file a notice within 30 days after every write-off and submit a sworn statement signed by the bank president or officer of equivalent rank that the write-off did not include transactions with DOSRI (directors, officers, stockholders and related interests).

The amendment would also require banks to instead submit a copy of the board resolution approving the write-off.

At the same time, the MB also decided, in its recent regular meeting, to allow other banking functions that may be outsourced by banks and other non-bank financial institutions under BSP supervision.

This MB decision would enable banks to focus on their core business activities and enhance cost efficiency.

Under the additional guidelines, back and data recovery operations may now be outsourced, subject to prior approval of the MB.

Legal services from local legal counsel and compliance risk assessment and testing, on the other hand, may be outsourced without need of prior BSP approval.

The new rules would allow banks/non-banks to outsource banking services such as loan documentation, collection of defaulted accounts and crisis management operations that can be better managed and handled by third party service providers with the necessary resources and specialized skills, training and experience.

Compliance risk assessment and testing may also be outsourced, subject to appropriate oversight by the compliance officer.