Regulatory Relief for Banks/NBQBs Affected by Tropical Cyclone "Josie"

BANEKO SeNrnaL NG PILIPINAS OFFICE OF THE DEPUW GOVERNOR FINANCIAL SUPERVISION SECTOR MEMORANDUM NO. M-2018- OL4 To Arr BANKS/NON-BANK FTNANCTAL TNSTTTUTTONS W|TH QUAS|- BANKING FUNCTIONS (NBQBs) Subject : Regulatory Relief for Banks/NBQBs Affected by Tropical Cyclone "Josie" The Monetary Board, in its Resolution No. 1311 dated 10 August 2OL8, approved to grant temporary regulatory and rediscounting relief measures to banks/NBQBs with head offices (HOs) and/or regular branches/branch-lite/microfinance-oriented branches located in the areas which were devastated by Tropical Cyclone "losie", based on Situation Report No. 20 dated 27 July 2018 of the National Disaster Risk Reduction and Management Council, as follows: Region Areas Resion I (llocos Reeion) llocos Norte, llocos Sur, La Union, and Pangasinan Cordil lera Administrative Abra, Benguet, lfugao, Kalinga, and Mountain Region Province Region ll (Cagayan Valley) Cagayan Region lll (Central Luzon) Bataan, Bulacan, Nueva Ecija, Pampanga, Tarlac, and Zambales Region lV-A (CALABARZON) Cavite, Laguna, Batangas, Rizal, and Quezon Resion lV-B (MIMAROPA) Oriental Mindoro, and Occidental Mindoro Region Vl (Western Visavas) Aklan, Antique, lloilo, and Negros Occidental National Capital Region Cities of Malabon, Marikina, Parafiaque, Pasig, Quezon, and Valenzuela 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 the Bangko Sentral ng Pilipinas (BSP), exclusion of the loans of borrowers in affected areas, which should have been reclassified as past due loans (PDLs) under Section X305 of the Manual of Regulations for Banks/Section 4305Q of the Manual of Regulations for Non-Bank Financial Institutions, on 2t July 2018 (the date when Tropical Cyclone "Josie" made its first landfall) and those becoming past due up to 31 July 2019, 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; A. MabiniSt., Malate 1004 Manila, Philippineso(632l,[email protected]

b. Non-imposition of penalties on legal reserve deficiencies of TBs/RBs/Coop Banks/NBQBs with HOs and/or branches/branch-lite/microfinance-oriented branches in the affected areas incurred starting from reserve weeks ended 26 July 20L8 to 3l January 2OL9; c. Moratorium without penalty on monthly payments due to BSP until 31 January 20L9 for banks with ongoing rehabilitation programs upon filing of application for extension/rescheduling with the Department of Loans and CrediU d. For all types of credits extended to individuals and businesses directly affected by the calamity, allowing, subject to prior BSP approval, the booking of allowances for probable losses on a staggered basis over a maximum period of five years on loans outstanding as of 2l July 2018; and e. Non-imposition of monetary penalties for delays incurred in the submission of all supervisory reports due to be submitted from 2L July 2018 to 31 January 2OL9; For All Banks f. Allowing banks to provide financial assistance to their officers and employees who were affected by Tropical Cyclone "Josie" even if the purpose of such assistance is not identified as eligible for credit accommodation under their existing BSP-approved Fringe Benefit Programs: Provided, that banks that shall change any of the provisions of the earlier BSP-approved program shall subsequently submit for approval of BSP, the Board of Directors-approved purposes for the grant of loans, advances, or any other forms of credit accommodations to its officers, to the appropriate supervision and examination department for regularization; For All Rediscountins Banks g. Upon application, granting of a 60-day grace period to settle the outstanding rediscounting obligations as of 2L July 20L8 with BSP, of all rediscounting banks with HOs, or with regular branches/branch-lite/microfinance-oriented branches or with end-user borrowers in the affected areas, except those cited by Financial Supervision Sector with serious violations or findings; and h. In addition to above, allowing the rediscounting banks to restructure with BSP, on a case-to-case basis, the outstanding rediscounted loans of their end-user borrowers affected by Tropical Cyclone "Josie", subject to the terms and conditions stated in the implementing guidelines (Annex "A"). For information and guidance. azw' G. FONACIER lA August 2018

, Annex,,A,, IMPLEMENT]NG GUIDELINES ON THE RESTRUCTURING SCHEME COVERING THE REDISCOUNTING OBLIGATIONS WITH THE BANGKO SENTRAL NG PILIPINAS (BSP) OF ,,JOSIE" REDISCOUNTING BANKS IN THE AREAS AFFECTED BY TROPICAL CYCLONE 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 Tropical Cyclone "Josie"; 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 Tropical Cyclone "Josie", and maintain if not improve the quality of the loan portfolio of the BSP. 2. Qualified Banks 2.1. All rediscounting banks with end-user borrowers located in the areas which were devastated by Tropical Cyclone "Josie", based on Situation Report No' 20 dated 27 luly 2018 of the National Disaster Risk Reduction and Management Council, as follows: Region Areas Region I (llocos Region) llocos Norte, llocos Sur, La Union, and Pangasinan Cord illera Ad ministrative Abra, Benguet, lfugao, Kalinga, and Mountain Region Province Region ll (Cagayan Valley) Cagayan Region lll (Central Luzon) Bataan, Bulacan, Nueva Ecija, Pampanga, Tarlac, and Zambales Region lV-A (CALABARZON ) Cavite, Laguna, Batangas, Rizal, and Quezon Resion lV-B (MIMAROPA) Oriental Mindoro, and Occidental Mindoro Region Vl (Western Visayas) Aklan, Antique, lloilo, and Negros Occidental National Capital Region Cities of Malabon, Marikina, Paraffaque, Pasig, Quezon, and Valenzuela 2.2. Rediscounting banks cited by the Financial Supervision Sector with serious violations or findings, and/or which are currently under investigation or subject to legal action by the Office of 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.

3. Terms and Conditions 3.1. Maturity The restructured loan shall have a maximum term of five years. 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 ofthe 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. lnterest 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 Principol. 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. Page2 of 4

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 o 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. o 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. o The DLC may exercise the option to refer to the Office of Special lnvestigation 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 4.1. Filing of Application The bank shall file with the DLC an application for restructuring of its outstanding rediscounting loans, supported by the following documents: o 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.

lri . The restructured Promissory Notes of the end-user borrowers and other supporting documents. o 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: o Execute the applicable document under ltem No. 4.L of the lmplementing Guidelines. o 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 Sienatories of the BSP Transaction Authorized BSP Officer Approval of the application to avail of the Director, DLC, or in her absence, any of loan restructurine scheme the DLC Deputy Directors Approval to release the collateral Director, DLC, or in her absence, any of documents the DLC Deputv Directors Execution of Cancellation of Deeds of Real Deputy Governor, Monetary and Economics Estate Mortgage, Assignment or Pledge Sector 6. Other Provisions 5.1. 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. Effectivity Date The loan settlement scheme shall be made available up to 3l January 2019 only.