Question & AnswerQ&A (BSP CIRCULAR NO. 1223)
Banks and Non-Bank Financial Institutions (NBQBs) have full discretion in restructuring loans to provide flexibility in repayment arrangements without impairing their financial interest, except in special cases like loans sourced from foreign currency obligations. Restructuring of loans granted to directors, officers, stockholders and their related interests (DOSRI) should be on terms not less favorable than those offered to others.
Restructured loans are loans whose principal terms and conditions have been modified through a restructuring agreement that sets forth a new payment plan or schedule. Modifications may include changes in maturity, interest rate, collateral, or an increase in the face amount due to capitalization of accrued interest or charges.
No, loans that are items in litigation, subject of judicially approved compromise, or covered by petitions for suspension or new payment plans approved by court or SEC are not classified as restructured loans.
Loan restructuring requires the approval of the bank/NBQB's board of directors by resolution that includes the basis or justification, evaluation of the borrower's capacity to pay including business viability, and the nature and extent of the bank's protection. The board may delegate authority to committees or officers with specific guidelines submitted to the Central Bank.
The restructuring of loans granted to DOSRI must be approved by the Board of Directors and cannot be delegated to committees or officers.
Restructured loans are to be classified as a separate account classification and clearly identified for recording and reporting purposes, with separate appropriate records maintained.
Interest on restructured loans may be accrued only if (1) the loan is current at the time of interest accrual and (2) there is no previously accrued or capitalized but uncollected interest on the loan.
Restructured loans that become past due shall be considered as past due in accordance with the relevant provisions of the Manual of Regulations for Banks and Other Financial Intermediaries specified for each book.
Yes, the board of directors may delegate restructuring approval authority to committees or officers, provided there are board-prescribed guidelines which must be submitted to the Central Bank within 30 days after approval. However, restructuring of DOSRI loans and some other specific loans require board approval.
BSP Circular No. 1223 took effect immediately upon its adoption on January 19, 1990.