Definition of "Substandard-Secured" Loans Subject to 12.5% Provisioning
Loans Secured by Real Estate Property
- Conditions for 12.5% provisioning:
- Not restructured loans.
- Collateral fully secured by real estate property with loan value up to 70% of the appraised property value.
- Appraisal of property done within one year prior.
- Independent appraiser appraisal is required if loan values exceed specific benchmarks:
- P5 million for commercial banks.
- P1 million for thrift banks.
- P500 thousand for rural banks.
- Conditions for 12.5% provisioning:
Loans Secured by First Class Shares of Stocks
- Must comply with the definition in Circular No. 228 (Feb 29, 2000).
- Loan value up to 50% of the prevailing market value at the time of review.
Loans Secured by Standby Letters of Credit
- Letters must be issued by banks with satisfactory financial condition.
Provision for 25% Allowance for Probable Losses
- Loans classified as "Substandard-Secured" without supporting latest Audited Financial Statements (AFS) or Income Tax Returns (ITRs) must have a 25% allowance.
- All other "Substandard-Secured" loans not meeting the conditions for 12.5% provisioning shall be provided with a 25% allowance.
Provision for 6% Allowance and Approval Requirement
- Loans classified as "Substandard-Secured" to be assigned only 6% allowance must be justified.
- Such justification must be submitted to and approved by the Bangko Sentral ng Pilipinas (BSP).
Effective Date and Adoption
- The guidelines take effect immediately upon adoption.
- Adopted and signed by Deputy Governor Alberto V. Reyes on April 30, 2001.