BSP to set a separate credit limit for companies doing gov’t infra projects

The Bangko Sentral ng Pilipinas (BSP) said Thursday the policy-setting Monetary Board has amended regulations providing entities created as vehicles to implement major projects with a separate single borrower’s limit.
 
In a statement, the BSP said the loan limits for Special Purpose Entities supports the government’s Build, Build, Build program.

The current single borrower’s limit is 25 percent of a bank’s or quasi-bank’s net worth.

The central bank said Special Purpose Entities were given their own separate single borrower's limit "in consideration of the independence they usually enjoy under project finance schemes."
 
“Under these schemes, Special Purpose Entities are ring-fenced by appropriate legal structures, operational set up, and controls so that assets and cash flows of SPEs remain separate from those of their sponsors, shareholders, and other related parties,” the BSP said.

The central bank noted the policy reform presumes that banks and quasi-banks know risks involved in such exposures.

“Lending to such dedicated Special Purpose Entities shall be subject to certain conditions to ensure effective risk monitoring and management,” it said.

“It is also required that purposes of project finance loans be in line with the government’s priority programs and projects,” the BSP noted.

Lending banks or quasi-banks must also ensure standard prudential controls, according to the BSP.

“These may include pledges of borrowers’ shares, assignments of borrowers’ assets, revenues, cash waterfall accounts and project documents,” the central bank said.

To curb excessive credit risk-taking, banks or quasi-banks must also take into account their total project finance exposures in managing large exposures and credit risk concentrations, the BSP emphasized.

“These prudential controls shall likewise apply to credit extended by banks or quasi-banks to their Special Purpose Entities subsidiaries and affiliates involved in project finance activities,” it said. —Ted Cordero/VDS, GMA News