Regulatory Relief for Banks/Non-Bank Financial Institutions with Quasi-Banking Functions (NBQBs) Affected by Typhoon "Nina"

./^runPlrV:\ tott a \ \ lil{(t,.,'' I BrNexo SENTRAL NG PrLtrerNAs \,.-N - -- / OFFICE OF THE DEPUW GOVERNOR SUPERVISION AND EXAMINATION SECTOR MEMORANDUM NO. M-2OL7- AO2 To ALL BANKS/NON.BANK FINANCIAL INSTITUTTONS WITH QUASI. BANKING FUNCTIONS Subject : Regulatory Relief for Banks/Non-Bank Financial Institutions with Quasi-Banking Functions (NBQBs) Affected by Typhoon "Nina" The Monetary Board, in its Resolution No.89 dated 12 January 2OL7, approved to grant temporary regulatory and rediscounting relief measures to banks/NBQBs with head offices (HOs) and/or branches/extension offices (EOs)/microfinance-oriented banking offices (MBOs) located in the areas which were devastated by Typhoon "Nina", based on Situation Report No. 12 dated 2 January 20L7 of the National Disaster Risk Reduction and Management Council, as follows: Region Areas IV-A Batangas, Cavite, Laguna, Quezon, Rizal IV-B Marinduque, Occidental Mindoro, Oriental Mindoro, Romblon V Albay, Camarines Norte, Camarines Sur, Catanduanes, Masbate, Sorsogon vill Northern Samar The temporary relief shall be in the form of the following, whenever applicable: For Thrift Banks (TBs)/Rural Banks (RBs)/Cooperative Banks (Coop Banks)/NBQBs a. During the temporary grace period for payment or upon their restructuring and subject to reporting to Bangko Sentral ng Pilipinas (BSP), exclusion of the loans of borrowers in affected areas, which should have been reclassified as past due loans (PDL) under Section X305 of the Manual of Regulations for Banks/4306Q of the Manual of Regulations for Non-Bank Financial lnstitutions on 25 December 2016 (the date when Typhoon "Nina" made its first landfall) and those becoming past due up to 3L December 20L7, from the computation of PDL ratio; and for this purpose, waiver of BSP documentary requirements for restructuring of loans; provided, that the bank/NBQB will adopt appropriate and prudent operational control measures; b. Non-imposition of penalties on legal reserve deficiencies of TBs/RBs/Coop Banks/NBQBs with HOs and/or branches/EOs/MBOs in the affected areas incurred starting from reserve weeks ended 29 December 201G to 29 June 2017; A. Mabini St., Malate 1004 Manila, Phillppineso(632l'[email protected]

c. Moratorium without penalty on monthly payments due to the BSP until 30 June 2OL7 for banks with ongoing rehabilitation programs upon filing of application for extension/rescheduling with the Department of Loans and Credit; d. For alltypes of credits extended to individuals and businesses directly affected by the calamity, allowing, subject to BSP prior approval, the booking of allowances for probable losses on a staggered basis over a maximum period of 5 years on loans outstanding as of 25 December 2016; and e. Non-imposition of monetary penalties for delays incurred in the submission of all supervisory reports due to be submitted from 25 December 2OL6 to 30 June 20L7. For All Banks f. Allowing banks to provide financial assistance to their officers and employees who were affected by the calamity even if not within the scope of their existing BSP- approved Fringe Benefit Programs (FBPs), subject to subsequent submission of request for approval of the amendment to their FBPs to the appropriate supervision and examination department of the BSP for regularization. For All Rediscountins Banks g. Granting of a 60-day grace period to settle the outstanding rediscounting obligations as of 25 December 2016 with the BSP of all rediscounting banks with HOs, or with branches/EOs/MBOs or with end-user borrowers in the affected areas, except those with serious violations or findings with the BSP Supervision and Examination Sector; and h. In addition to above, allowing the rediscounting banks to restructure with the BSP, on a case-to-case basis, the outstanding rediscounted loans of their end-user borrowers affected by the calamity, subject to the terms and conditions stated in the implementing guidelines (Annex "A"). For information and guidance. I IJ- <r-lr NESTOR A. EIPEN|IrA, Deputy Governor lf lanra ry 2oL7

Annex "A" IMPLEMENTING GUIDELINES ON THE RESTRUCTURING SCHEME COVERING THE REDTSCOUNTTNG OBLTGATTONS W|TH THE BANGKO SENTRAL NG ptLtptNAS (BSp) OF REDISCOUNTING BANKS IN THE AREAS AFFECTED BY TYPHOON 'NINA' 1. Obiectives The objectives of the loan settlement scheme are, as follows: 1.1. To support the recovery efforts of rediscounting banks in the areas affected by Typhoon "Nina"; L.2. To enable the rediscounting banks to liquidate their loan obligations with the BSP by way of restructuring; and 1.3. To ensure the collection of the rediscounted loans which may become past due in view of the damages caused by Typhoon "Nina", and maintain if not improve the quality of the loan portfolio of the BSP. 2. Qualified Banks 2.L. All rediscounting banks with end-user borrowers located in the areas which were devastated by Typhoon "Nina" based on Situation Report No. 12 dated 2 January 20L7 of the National Disaster Risk Reduction and Management Council, as follows: Resion Areas IV-A Batangas, Cavite, Laguna, Quezon, Rizal IV-B Marinduque, Occidental Mindoro, Oriental Mindoro, Romblon V Albay, Camarines Norte, Camarines Sur, Catanduanes, Masbate, Sorsogon vill Northern Samar 2.2. Rediscounting banks with serious violations or findings with the Supervision and Examination Sector (SES), and/or which are currently under investigation or subject to legal action by the Office of the Special Investigation shall not be qualified to avail of the restructuring scheme. 2.3. In addition to ltem No. 2.2 above, the Department of Loans and Credit (DLC) shall evaluate each bank to determine if each would qualify for the restructuring scheme. Terms and Conditions 3.1. Maturity The restructured loan shall have a maximum term of five years. Page L of4

3.2. Amount to be Restructured The amount to be restructured shall be equivalent to the following: o Principal. Unpaid outstanding balance of the principal obligation in the books of accounts of the BSP. o Accrued lnterest. Unpaid interest due on the outstanding principal obligation as of the end of the applicable repayment or amortization date, preceding the approval of the loan restructuring. 3.3. Interest Rate The interest rate to be charged against the outstanding principal balance of the restructured loan shall be based on prevailing rediscount rate. The interest shall be re-priced annually. 3.4. Maximum Bank Lending Rate The restructured interest rate of the bank to its end-user borrowers shall not exceed six percent over and above the applicable BSP interest rate. Moreover, the bank shall not charge interest on accrued interest. 3.5. Terms of Repayment 3.5.1. Settlement Value. The settlement value shall be paid by the bank in equal monthly amortizations; provided, that the amortization period shall not exceed five years, to wit: o Principal. The principal obligation shall be paid in equal monthly amortizations plus the applicable rediscount rate. o Accrued lnterest. The accrued interest on the principal obligation as of the end of the month immediately preceding the approval of the loan settlement scheme shall likewise be paid in equal monthly amortizations. No interest shall be charged on the accrued interest. 3.5.2. Grace Period. The Bank shall be given a grace period of six months within which to pay the first amortization. 3.6. Collaterals The following shall be the acceptable collaterals: o Restructured promissory notes of end-user borrowers;

o Hard collaterals owned by the bank such as bank premises and government securities; and o Other collaterals acceptable to the DLC. 3.7. Default Cause Failure to pay two or more amortizations shall be considered an event of default and shall render the unpaid balance of the loan, plus accrued interest and penalty charges due thereon, immediately due and demandable. A penalty charge of twelve percent per annum shall be assessed on the defaulted amortization payment, reckoned from the amortization due date to date of payment. The DLC may exercise the option to refer to the Office of Special Investigation or to an external lawyer for appropriate legal action, without further need for demand or notice to the defaulting bank. 3.8. Required Documents Qualified banks shall submit the following documents: o Letter of Understanding (Lou), agreeing to the terms and conditions of the restructuring. The LOU shall be executed by the senior officers of the bank, duly designated by its Board of Directors o Surety Agreement, if there is collateral deficiency 4. Application Procedures 4.L. Filing of Application The bank shall file with the DLC an application for restructuring of its outstanding rediscounting loans, supported by the following documents: Resolution of the Board of Directors a) authorizing the bank to enter into a loan settlement arrangement with the BSp, and b) designating authorized senior officers thereof. The restructured Promissory Notes of the end-user borrowers and other supporting documents. Page 3 of4

. Promissory Note with Trust Receipt Agreement and Deed of Assignment executed by the authorized senior officers of the bank, duly notarized. 4.2. Notice of Approval of Application The DLC shall notify the bank of the approval of its application to avail of the loan settlement scheme. Upon receipt of said advice, the bank shall: . Execute the applicable document under ltem No. 4.1 of the lmplementing Guidelines . Pay the required amortization immediately on the month following the date of approval of the loan restructuring scheme and monthly thereafter until fully paid. 5. Authorized Signatories of the BSP Transaction Authorized BSP Officer Approval of the application to avail of Director, DLC, or in her absence, any the loan restructuring scheme of the DLC Deputy Directors Approvalto release the collateral Director, DLC, or in her absence, any documents of the DLC Deputy Directors Execution of Cancellation of Deeds of Deputy Governor, Monetary Stability Real Estate Mortgage, Assignment or Sector Pledge 6. Other Provisions 6.1. Value-Date of the Settlement Scheme The value-date of the settlement shall be the end of the month immediately preceding the date of approval of the loan restructuring. 6.2. Effective Date The loan settlement scheme shall be made available up to 30 June 2017 only.