Authority and governing resolution
- The Monetary Board decides the reduction of real estate loan ratios through Resolution No. 477.
- Resolution No. 477 is dated April 28, 1997.
- The Circular Letter is signed by the Deputy Governor Alberto V. Reyes.
Loan value limit for real estate security
- Commercial banks must limit the loan value secured by real estate to not more than 60% of the appraised value of the real estate security and the insured improvements.
- The prior limit of 70% is reduced to not more than 60%.
- The limit applies to real estate loans granted by a commercial bank.
Aggregate cap on real estate loans
- Commercial banks must observe an aggregate limit on real estate loans of not more than 20% of their respective total loan portfolio.
- The 20% cap applies to total outstanding real estate loans measured against the bank’s total loan portfolio.
One-year compliance period for non-conforming banks
- Commercial banks whose total outstanding real estate loans exceed 20% of their total loan portfolio receive one year to comply.
- Compliance is required within one year from the Circular Letter’s directive to do so.
Board directive to banks
- Commercial banks are directed to observe the prescribed ratio on real estate loans.
- Commercial banks must apply both: the 60% loan-to-appraised-value limit and the 20% portfolio aggregate cap.
- Banks must follow the one-year grace period only when their outstanding real estate loans exceed 20% of the total loan portfolio.