BSP Rules on Non-Performing Loans

Section 1 amends Section 1 of BSP Circular No. 202 dated May 27, 1999.
Section 2 amends Section 1 of BSP Circular No. 143 dated October 1, 1997.
The amendments adopt updated rules on when loans and loan receivables become non-performing and past due for installment-based loans.

Section 1 provides that non-performing loans generally refer to loan accounts whose principal and/or interest is unpaid for thirty (30) days or more after due date or after they have become past due under existing BSP rules and regulations.
Section 1 states that this general rule applies to loans payable in lump sum and loans payable in quarterly, semi-annual, or annual installments, where the total outstanding balance is treated as non-performing.
Section 1 requires that for loans payable in monthly installments, the total outstanding balance is non-performing when three (3) or more installments are in arrears.
Section 1 requires that for loans payable in daily, weekly, or semi-monthly installments, the total outstanding balance is non-performing when the loan becomes past due under the criteria in Circular No. 143 dated October 1, 1997, including the 10% arrears trigger.

Section 2 amends Item e of Subsec. X306.1 of the Manual of Regulations for Banks by setting the schedule for loans/receivables payable in installments.
Monthly installments are treated as past due when there are at least 3 installments in arrears.
Quarterly, semestrally, and annually payable loans/receivables are treated as past due when there is at least 1 installment in arrears.
Section 2 establishes an overriding rule: when the total amount of arrearages reaches twenty per cent (20%) of the total outstanding balance of the loan/receivable, the total outstanding balance is treated as past due regardless of the number of installments in arrears.
Section 2 establishes a separate threshold for payment modes other than those listed (including daily, weekly, or semi-monthly): the entire outstanding balance is treated as past due when arrearages reach ten percent (10%) of the total loan receivable balance.

Section 1 requires that restructured loans are considered non-performing in accordance with existing rules and regulations.
Section 1 provides that all items in litigation as defined in the Manual of Accounts for Banks are considered non-performing loans.
Section 2 defines “installments” for purposes of the past-due schedule as principal and/or interest amortizations due on several dates as indicated or specified in the loan documents.
Section 1 clarifies that for monthly-installment loans, 3 or more installments in arrears control the non-performing determination, while for daily/weekly/semi-monthly modes, the past-due criteria in Circular No. 143 control (including the 10% arrears threshold).