QuestionsQuestions (BSP CIRCULAR NO. 1223)
Banks/NBQBs have full discretion to restructure loans to provide flexibility in arranging repayment without impairing or endangering the bank’s/NBQBs’ financial interest, except in special cases approved by the Monetary Board (e.g., loans whose funding is sourced partly or wholly from foreign currency obligations). Restructuring loans granted to DOSRI must be on terms not less favorable than those offered to others.
Restructured loans are loans whose principal terms and conditions are modified under a restructuring agreement providing a new plan of payment or a schedule of periodic payments. The modification may include changes in maturity, interest rate, collateral, or capitalization of accrued interest/accumulated charges resulting in an increased face value.
Items in litigation and loans subject of judicially approved compromise, as well as those covered by petitions for suspension or new plans of payment approved by the Court or the SEC, shall not be classified as restructured loans.
A loan may be restructured only upon approval of the bank’s/NBQBs board of directors through a resolution that embodies (a) the basis/justification; (b) determination of the borrower’s capacity to pay (e.g., business viability); and (c) the nature and extent of protection of the bank’s exposure.
Yes. The board may delegate approval authority to a committee or officer(s) provided that there are board-prescribed guidelines specifically on loan restructuring, and those guidelines must be submitted to the appropriate Central Bank supervising/examining department within 30 days from approval of the guidelines.
Yes. Loans previously approved by the executive committee and those granted to DOSRI must be approved by the Board as provided under existing rules and regulations. Also, loans restructured other than those approved by the board must be reported to the board for confirmation.
Because restructuring should primarily assist borrowers in settling loan obligations while taking into account their capacity to pay. This is meant to help maintain or improve the soundness of the bank’s lending operations and safeguard the bank’s financial interests.
Restructuring of loans granted to DOSRI must be on terms not less favorable to the bank/NBQBs than those offered to others.
Interest on restructured loans may be accrued only if: (1) the loan is on current status at the time of interest accrual; and (2) there is no previously accrued and/or capitalized but uncollected interest on such loan.
Interest earned on extended or renewed loans may be accrued provided there is no previously accrued but uncollected interest on those loans.
Restructured Loans shall be an account classification by itself and must be identified as such for recording and reporting purposes. Separate appropriate records must be maintained for Restructured Loans accounts.
It states that restructured loans shall be considered past due in accordance with the specific rule referenced as Section ____4/ (the detailed standard is not shown in the excerpt, but the circular directs that classification must follow that referenced section).
The circular gives an example: restructuring of loans the funding of which is sourced partly or wholly from foreign currency obligations requires special approval by the Monetary Board.
It took effect immediately.