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

BANGKo SeNTRaL NG PILIPINAS OFFICE OF THE DEPUTY GOVERNOR SUPERVISION AND EXAMTNATION SECTOR MEMORANDUM NO. M-2015- 039 To Att BANKS/NON.BANK FINANCIAI INSTITUTIONS WITH QUASI. BANKING FUNCTIONS Subject : Regulatory Relief for Banks/Non-Bank Financiat Institutions with Quasi-Banking Functions (NBeBs) Affected by Typhoon ,,Lando,, The Monetary Board, in its Resolution No. 1804 dated 29 october 2015, approved to grant temporary regulatory and rediscounting relief measures to banks/wBQBs with head offices (Hos) and/or branches located in the areas which were devastated by Typhoon "Lando" based on situation Report No. 10 dated 20 october 2015 of the National Disaster Risk Reduction and Management council, as follows: llocos Norte, llocos Sur, ta Union and pa , lsabela, Nueva Vizcaya and euirino Aurora, Bataan, Bulacan, Nueva effi Zambales Cavite, Batangas, Laggna, euezon indTEJ Camarines Norte and Cantanduanes Cord illera Administrative Abra, Apayao, Benguet, ttrgm Province The temporary relief shall be in the form of the following whenever applicable: Fo, Thrift B.nkr (TBtr "r.r Brnkr (RBr) ^p"r.tiue (coop) Brnk, ,BeBs a' During a temporary grace period for payment or upon their restructuring and subject to reporting to the Bangko sentrar ng piripinas (Bsp), excrusion of the loans of borrowers in affected areas, which should have been reclassified as past due loans (pDLs) under section X306 of the Manual of Regulations for Banks/4305Q of the Manual of Regulations for Non-Bank Financial Institutions (as amended by circular No. g55 dated 29 october z0L4l on r,8 october 2015 (date when Typhoon "Lando" made its randfail) and those becoming past due up to 31 october 2016, 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; b' Reduction of the 5% general loan loss provision to l%for restructured loans of borrowers in affected areas from 1g october 2015 to 31 october 201G; A.Mabinist.,Ma|ate1o04Mani|a,Phi|ippineso(632)7o8-77ot.***.o,pffi

c. Non-imposition of penalties on regal reserve deficiencies of TBs/RBs /coop Banks/NBQBs with Hos and/or branches in the affected areas incurred starting from reserve weeks ended 22 october 2015 to 21 April 2oL6; d. Moratorium without penalty on monthly payments due to Bsp until 30 April 2016 for banks with ongoing rehabilitation programs upon filing of a pplication for extension/rescheduling; e. For all types 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 five years on loans outstanding as of 1g October 2OL5; f. Non-imposition of monetary penalties for delays in the submission of all supervisory reports due to be submitted from 1g october 2015 to 30 April 2015; For All Banks g. Allowing banks to provide financial assistance to their officers and employees who were affected by the calamity even if not within the scope of the existing BSP-approved Fringe Benefit Program (FBP) subject to subsequent submission of request for approval of the amendment to FBp to the appropriate supervision and examination department for regularization; For All Rediscountine Banks h. Upon application, granting of a 60-day grace period to settle the outstanding rediscounting obligations as of l-8 October 2015 with BSp of all rediscountint banks with Ho, or with branches or with end-user borrowers in the affected areas, except those with serious violations or findings with the supervision and Examination Sector; and t. 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 the calamity, subject to the terms and conditions stated in the implementing guidelines attached as Annex A to the proposed Memorandum to All Banks/NBeBs. For information and guidance. O{ ruou"rber 2015

Annex A IMPLEMENTING GUIDELINES ON THE RESTRUCTURING SCHEME COVERING THE REDISCOUNTING OBLIGATIONS WlrH THE BANGKO SENTRAL NG ptltplNAS (BSp) OF REDISCOUNTING BANKS IN THE AREAS AFFECTED BY TYPHOON "LANDO- 1-. Obiectives The objectives of the loan settlement scheme are as follows: 1.L. To support the recovery efforts of rediscounting banks in the areas affected by Typhoon "Lando"; 1-'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 ,,Lando,,, 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 Typhoon "Lando" based on Situation Report No. 10 dated 20 October 2015 of the National Disaster Risk Reduction and Management council as follows: llocos Norte, llocos Sur, La Union and Cagayan, lsabela, Nueva Vizcaya anO euirino Aurora, Bataan, Bulacan, Nueva Ecija, pampanga, Tarlac and Zambales Cavite, Batangas, Laguna, euezon anO mrat Camarines Norte and Cantanduanei Cordillera Adm inistrative Abra, Apayao, Benguet, lfugm 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 special lnvestigation shall not be qualified to avail of the restructuring scheme. 2'3' ln addition to ltem No. 2.2, the Department of Loans and credit (DLC) shall evaluate each bank to determine if each would quarify for the restructuring. 3. Terms and Conditions 3.1. Maturity The restructured roan shail 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. 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 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. 3.6. Collaterals The following shall be the collaterals acceptable: 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 shail be considered an event of default and shall render the unpaid balance of the loan, plus interest and penalty charges due thereon, immediately accrued demandable. due and 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 lnvestigation or to an externar rawyer for to the office of Special appropriate regar action, without further need for demand or notice to the defaurting 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 Surgty Agreement, if there is collateral deficiency 4. Application procedures 4.1. Filing of Application The bank shall file with the DLC an application outstanding rediscounting roans, supported for restructuring of its by the foilowing 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 sen ior officers thereof. o 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 loan settlement scheme. Upon receipt of the of said advice, the bank shall: Page 3 of4

o Execute the applicable document under ltem No. 4.1 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 Sisnatories of the BSp Transaction Authorized BSP Officer Approval of the application to avail of the Director, DLC, or in her absence, any of loan restructuring scheme the DLC Deputy Directors Approval to release the collateral Director, DLC, or in her absence, any of documents the DLC Deputy Directors Execution of Cancellation of Deeds of Real Deputy Governor, Monetary Stability Sector Estate Mortgage, Assignment or Pledge 5. 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. 5.2. Effectivity Date The loan settlement scheme shall be made available up to 30 Aprit 2016 only.