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Philippine central bank relaxes lending rules to spur infrastructure financing

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The Philippine central bank said on Tuesday it has made it easier for banks to extend loans to directors, officers, stockholders, their related interests (DOSRI) and affiliates to help finance the government's key infrastructure projects.

[MANILA] The Philippine central bank said on Tuesday it has made it easier for banks to extend loans to directors, officers, stockholders, their related interests (DOSRI) and affiliates to help finance the government's key infrastructure projects.

But banks are expected to have "robust" internal policies and procedures in handling related party transactions, which should also be conducted on an "arm's length basis," the central bank said in a statement.

The country needs private funds to upgrade its ageing infrastructure as it aims to lift its growth rate to 7 to 8 per cent to alleviate poverty and generate much-needed jobs.

Under the new rules, loans extended to DOSRIs will not be counted against the ceiling on unsecured loans during the pre-operational phase of the project, but the ceiling will be applied once the project becomes operational.

sentifi.com

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The central bank also raised the individual and unsecured limits for loans granted to subsidiaries and affiliates undertaking these projects to encourage more entities to participate in the government's development programme.

The revised rules also gave the central bank the authority to direct banks to deduct from capital all credit exposure to their related parties that are not engaged on arm's length basis "to promote responsible lending to related parties."

The definitions of "related interest" and "affiliates" were also fine-tuned so regulators can calibrate prudential requirements "with the degree of potential abuse in the relationship.

REUTERS

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