Law Summary

I. Overview of the Circular

• This Circular, adopted on December 17, 1992, details the decision made by the Monetary Board regarding the adjustment of the single borrower's limit applicable to specific financial institutions.
• The directive is rooted in Resolution No. 1102, dated November 23, 1992.

II. Increase of Single Borrower's Limit

• The Circular authorizes a rise in the single borrower's limit for the following institutions:
  • Thrift Banks
    • The limit is increased from 15% to 25% of their unimpaired capital.
  • Non-Bank Financial Institutions with Quasi-Banking Functions
    • The limit is similarly set to 25% of unimpaired capital.
  • Non-Stock Savings and Loan Associations
    • Also subject to the same 25% of unimpaired capital limit.
  • Rural Banks
    • The limit increases from 15% to 25% of unimpaired capital, specifically net of capital that arises from the conversion of arrearages with the Central Bank under rehabilitation programs.

III. Definitions

• Single Borrower’s Limit: This term refers to the maximum amount of credit that can be extended to a single borrower by the financial institutions mentioned.
• Unimpaired Capital: This is the capital that is not diminished by losses and is available for lending purposes.

IV. Important Requirements

• Financial institutions must calculate their single borrower's limit based on their unimpaired capital as defined above.
• Rural banks are required to account for any capital stemming from rehabilitation programs when determining their limits.

V. Effective Date

• The provisions of this Circular are effective immediately upon adoption.

VI. Penalties and Consequences

• While the Circular does not explicitly state penalties, it implies adherence to the new limits is essential for compliance with regulatory standards set by the Bangko Sentral ng Pilipinas (BSP).

VII. Cross-References

• The Circular references various rehabilitation programs of the Central Bank of the Philippines impacting capital calculations for rural banks.

Key Takeaways

• The BSP Circular No. 1371 s. 1992 significantly increases the borrowing limits for thrift banks, non-bank financial institutions, non-stock savings, and loan associations, and rural banks to 25% of unimpaired capital.
• Financial institutions must ensure compliance with the new limits immediately to avoid potential regulatory issues.
• The adjustments are part of broader regulatory measures to enhance the lending capacity of these institutions and support financial stability.