Eligible Guarantors under the Risk Weight Framework
- Eligible guarantors include:
- Philippine National Government and Bangko Sentral ng Pilipinas (BSP)
- Central governments, central banks, and PSEs of foreign countries; multilateral development banks (MDBs) with lower risk weight than the counterparty
- Banks with lower risk weight than the counterparty
- Entities with external credit assessment of at least A- rating or equivalent
- Agricultural Guarantee Fund Pool (AGFP)
Amendments to Subsection on Risk-Weighted Assets (Subsec X116.3)
- On-balance sheet assets with 20% risk weight:
- Loans to exporters guaranteed by Small Business Guarantee and Finance Corporation (SBGFC)
- Loans to small farmers/fisherfolk with AGFP guarantees (subject to same fund and leveraging conditions as above)
- Foreign currency checks and other cash items in acceptable reserve currencies
- 125% risk weight assigned to all non-performing loans (NPLs), except housing NPLs fully secured by first mortgages; NPLs can be weighted according to eligible collateral or guarantor risk weight.
- NPLs guaranteed by AGFP assigned 20% risk weight, with rules for bank's right to pursue guarantor.
- Eligible guarantors for these provisions include LGU Guarantee Corporation (LGUGC) covering loans with internal revenue assignment, and AGFP.
Credit Risk Weights under Circular No. 688 (Amended)
- On-balance sheet assets with 20% risk weight include:
- Claims on Philippine and foreign incorporated private enterprises of highest credit quality
- Loans to small farmers and fisherfolk guaranteed by AGFP (same fund and leveraging conditions apply)
- Eligible guarantors for claims with guarantees include:
- Philippine National Government and BSP
- Multilateral development banks
- Entities with highest credit quality including foreign central governments, Philippine local government units, non-central public sector foreign entities, Philippine and foreign incorporated banks
- LGU Guarantee Corporation for bonds covered by internal revenue allotment
- Agricultural Guarantee Fund Pool (AGFP)
Effectivity and Administrative Details
- Circular takes effect 15 calendar days after publication in the Official Gazette or a newspaper of general circulation.
- Approved by the Monetary Board on 14 February 2011, signed by Governor Amando M. Tetangco.
This law primarily refines the framework of risk weighting for bank loans, specifically recognizing the guaranteed exposure by the AGFP at a reduced risk weight of 20%. It lays down explicit conditions on funds guaranteeing loans, the leveraging ratio, and asset risk weight investment requirements. It integrates AGFP among eligible guarantors and sets consistent treatment in various provisions for both performing and non-performing loans with AGFP guarantees.