Question & AnswerQ&A (BSP CIRCULAR NO. 713, S. 2011)
Loans to small farmers and fisherfolk engaged in palay and/or food production projects to the extent guaranteed by the AGFP are assigned a risk weight of 20%.
The maximum allowable leveraging ratio of the fund is two (2), meaning the maximum amount of loans guaranteed by the fund should not exceed twice the amount of money in the fund.
A separate fund must be maintained to guarantee bank loans, the leveraging ratio must not exceed two (2), and the fund must be invested in assets that have a 0% risk weight under the capital adequacy framework.
The Monetary Board approved the risk weighting under its Resolution No. 178 dated 3 February 2011.
Cash on hand and gold are assigned a risk weight of zero percent (0%).
Eligible guarantors include: (a) Philippine National Government and the BSP; (b) Central governments, central banks, and PSEs of foreign countries and MDBs with lower risk weight than the counterparty; (c) Banks with a lower risk weight than the counterparty; (d) Other entities with an external credit assessment of at least A- or equivalent; and (e) The Agricultural Guarantee Fund Pool (AGFP).
NPLs to small farmers engaged in palay and/or food production projects/activities guaranteed by the AGFP are assigned a 20% risk weight subject to the conditions on guarantees stipulated in the Circular.
The loan shall be assigned the risk weight applicable for non-performing loans (NPLs) if the guarantor cannot be pursued within the period stipulated in the guarantee contract.
Checks and other cash items are assigned a risk weight of twenty percent (20%).
The Circular took effect fifteen (15) calendar days following its publication either in the Official Gazette or in a newspaper of general circulation.