Law Summary
Application to Non-Bank Financial Institutions (Quasi-Banks)
- Similar provisions apply to quasi-banks regarding credit exposure limits to a single borrower.
- The total allowable increase is also 25% of the quasi-bank’s net worth for loans, credit accommodations, and guarantees related to PPP infrastructure or development projects.
- Certification by the Secretary of Socio-Economic Planning is also required for these exposures.
- The exposure limits and time frame (6 years from December 28, 2010) mirror those applicable to banks.
- Quasi-banks must also consider credit risk concentration from PPP projects in their internal capital adequacy assessment.
- Contracted amounts can be reduced but not increased after the six-year period.
Implementation and Effectivity
- The Circular was issued pursuant to Monetary Board Resolution No. 2049 dated December 6, 2012.
- The amendment applies both to the Manual of Regulations for Banks (MORB) and the Manual of Regulations for Non-Bank Financial Institutions (MORNBFI).
- The regulations took effect fifteen calendar days after publication in the Official Gazette or a newspaper of general circulation.
Key Legal Concepts and Implications
- Credit exposure limits help manage credit risk by capping bank and quasi-bank lending to single borrowers.
- The special allowance promotes private sector participation in government infrastructure projects through the PPP Program.
- Certification by the Secretary of Socio-Economic Planning ensures projects qualify under the designated development programs.
- Banks and quasi-banks are mandated to incorporate PPP-related exposures into their risk-based capital assessments, fostering prudent risk management.
- The time-limited increase balances the promotion of infrastructure financing with the need to control long-term credit risk concentrations.