Exclusion of LWDs from DOSRI rules on Gov't Loans

BSP Circular No. 616 amends Subsection X337.1 of the Manual of Regulations for Banks (MORB).
The amended rule provides that Sections X326 to X337 of the MORB apply to loans, other credit accommodations, and guarantees granted to the National Government or Republic of the Philippines (ROP), its political subdivisions and instrumentalities, as well as government-owned or controlled corporations (GOCCs) (X337.1 introductory paragraph).
The amended rule applies subject to eight clarifications enumerated under X337.1 (1 to 8).
BSP Circular No. 616 further provides that the same applicability rule also applies to Q-Regulations and Regulations of the Manual of Regulations for Non-Bank Financial Institutions (MORNBFI) (Section 2).

Loans, other credit accommodations, and guarantees to the ROP and/or its agencies/departments/bureaus are considered (a) non-risk and (b) not subject to any ceiling (X337.1(1)).
Loans, other credit accommodations, and guarantees of the BSP are considered (a) non-risk and (b) not subject to any ceiling (X337.1(4)).
Loans, other credit accommodations, and guarantees to the National Government or ROP and covered government entities remain governed by Sections X326 to X337 of the MORB, but the clarifications control the treatment described for specific borrower categories (X337.1).

Loans, other credit accommodations, and/or guarantees to GOCCs and to corporations where the ROP, its agencies/departments/bureaus, and/or GOCCs own at least twenty percent (20%) of the subscribed capital stock are treated as indirect borrowings of the ROP.
Such indirect borrowings are required to form part of the individual ceiling and the aggregate ceiling (X337.1(2)).
The Circular excludes certain GOCC and partly ROP-owned corporations transactions from the thirty percent (30%) ceiling on unsecured loans under Sections X330 and X331 (X337.1(2) proviso).
The excluded transactions are:
- (a) loans, other credit accommodations, and/or guarantees for priority infrastructure projects consistent with the Medium-Term Development Plan/Medium-Term Public Investment Program of the National Government, duly certified as such by the Secretary of Socio-Economic Planning (X337.1(2)(a));
- (b) loans, other credit accommodations, and/or guarantees granted to participating financial institutions (PFIs) in government lending programs where the borrowed funds are intended for relending to other PFIs or end-user borrowers (X337.1(2)(b));
- (c) loans, other credit accommodations, and/or guarantees to provide rediscounting facilities, and guarantee programs for loans granted to the agricultural sector and micro, small and medium enterprises (X337.1(2)(c)).

Loans, other credit accommodations, and/or guarantees granted to state universities and colleges (SUCs) are excluded from the thirty percent (30%) ceiling on unsecured loans under Sections X330 and X331 (X337.1(3)).
The Circular treats the BSP as an independent entity, and therefore not a related interest of the ROP and/or its agencies/departments/bureaus for purposes of these regulations (X337.1(4)).
Local government units (LGUs) are treated as separate from the ROP, other government entities, and from one another due to their full autonomy in the exercise of proprietary functions and management of economic enterprises granted under the Local Government Code of the Philippines, subject to limitations provided by law; hence, LGUs are not a related interest of the ROP and/or its agencies/departments/bureaus for purposes of these regulations (X337.1(5)).

The Circular provides that Local Water Districts (LWDs), although GOCCs, are considered separate from the ROP, other government entities, and from one another due to fiscal independence from the National Government, and therefore are not a related interest of the ROP and/or its agencies/departments/bureaus for purposes of these regulations (X337.1(6)).

In cases of loans, other credit accommodations, and guarantees to the ROP and/or its agencies/departments/bureaus, a director who acts as a government representative in the lending institution is not excluded from deliberations and from the determination of the majority of the directors (X337.1(7)).
In cases of loans, other credit accommodations, and guarantees to a borrowing government entity other than the ROP and its agencies/departments/bureaus, a director of the lending institution is excluded from deliberations and from the determination of the majority of the directors if that director is also a director, officer, or stockholder under existing DOSRI regulations (X337.1(8)).

The Circular is effective fifteen (15) days after publication in a newspaper of general circulation (Section 3).
The Circular’s provisions apply to the Q-Regulations and Regulations of the Manual of Regulations for Non-Bank Financial Institutions (MORNBFI) (Section 2).