Regulatory Relief for Banks Affected by Tropical Storm "Juaning"

Bancxo SENtneL N@ Prr-tprnes OFFICE OF THE DEPUW GOVERNOR SUPERVISION AND EXAMINATION SECTOR MEMORANDUM NO. M . 2011 -043 To : ALL BANKS Subject : Regulatory Relief for Banks Affected by Tropical Storm "Juaningl' The Monetary Board, in its Resolution No. t227 dated L1 August 20LL, approved to grant temporary regulatory and rediscounting relief to banks with head offices (HOs) and branches located in the following areas which were devastated by tropical storm "Juaning" based on the report of the National Disaster Risk Reduction and Management Council: a. .NCR: Las Pifias City, Muntinlupa City, Pasay City and Quezon City b. CAR: Benguet, lfugao and Kalinga c. Region l: La Union and Pangasinan d. Region ll: lsabela, Nueva Vizcaya and Quirino e. Region lll: Aurora, Bulacan, Nueva Ecija and Pampanga f. Region lV-A: Batangas and Quezon g. Region lV-B: Marinduque and Romblon h. Region V: 'Albay, Camarines Norte, Camarines Sur, Catanduanes, Masbate and Sorsogon i. Region Vl: lloilo and Antique j. Region Vll: Siquijor and Cebu k. Region Vlll: Leyte and Eastern Samar L Region X: Lanao del Norte The temporary relief shall be in the form of the following whenever applicable: '^ural For Thrift Banks (TBs) Banks (RBsl/Cooperative Banks (Coop Banks): a. Duiing a 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 X306 of the Manual of Regulations for Banks on 25 July 2011 and those becoming past due up to 31 December 20L2, from computation of PDL ratio: Provided, that BSP documentary requirements for restructuring of loans for this purpose are waived; Provided, further, that the bank will adopt appropriate and prudent operational controls; b. Reduction of the 5% general loan loss provision to !%for restructured loans to borrowers in affected areas from 25 July 2011to 31 December 2OL2; A. MabiniSt., Malate 1004 Manila, Philippines o (632) 524-70tt o www.bsp.gov.ph o [email protected]

Non-imposition of penalties on legal reserve deficiencies of TBs/RBs/Coop Banks with HOs and/or branches in the affected areas incurred starting from reserve weeks ended 28 July 2011 to 26 January 2QL2, provided these reserve deficiencies can be shown to be calamity-related rather than due to pre-existing condition; d. Moratorium without penalty on monthly payments due to the BSP until 31 January 2OL2 for banks with ongoing rehabilitation programs upon filing of application for extension/rescheduling; e. For all types of credits extended to individuals and businesses directly affeeted 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 25 July ZOLL; Non-imposition of monetary penalties fordelays in the submission of all supervisory reports due to be submitted from 25 July 2011 to 31 January 2OL2; and 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 Rediscounting Banks a. Upon application, granting of a 60-day grace period to settle the outstahding rediscounting obligations as of 25 July 2011 with the BSP of all rediscounting 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 b. In addition to above, allow 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. Deputy Govern f2 nrgrrtzotl PaEe 2 of 2

Annex A IMPLEMENTING GUIDELINES ON THE RESTRUCTURING SCHEME COVERING THE REDISCOUNTING OBLIGATIONS W]TH THE BANGKO SENTRAL NG PILIPINAS (BSP) OF REDISCOUNTING BANKS IN THE AREAS AFFECTED BY TROPICAL STORM "JUANING" L. 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 storm "Juaning"; 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 damage caused by the tropical stor"rn, 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 following areas which were devastated by tropical storm "Juaning" based on the report of the National Disaster Risk Reduction and Management Council dated 4 August ZOLLI. o NCR: Las Piffas City, Muntinlupa City, Pasay City and Quezon City o CAR: Benguet, lfugao and Kalinga o Region l: La Union and Pangasinan o Region ll: lsabela, Nueva Vizcaya and Quirino o Region lll: Aurora, Bulacan, Nueva Ecija and Pampanga o Region lV-A: Batangas and Quezon o Region lV-B: Marinduque and Romblon o Region V: Albay, Camarines Norte, Camarines Sur, Catanduanes, Masbate and Sorsogon c Region Vl: lloilo and Antique o Region Vll: Siquijor and Cebu . Region Vlll: Leyte and Eastern Samar o Region X: Lanao del Norte 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 bf Special lnvestigation shall not be qualified to avail of the restructuring scheme. 2.3. In addition to ltem No. 2.2, the Department of Loans and Credit shall evaluate each bank to determine if each would qualify for the restructuring.

Annex A 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 books of account ofthe BSP. o Accrued lnterest. Unpaid interest Uue 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 amortization; provided, that, the amortization period shall not exceed five years, to wit: o 'Principal. The principal obligation shall be paid in equal monthly amortization plus the applicable rediscount rate. Accrued lnterest. The accrued lnterest on the principal obligation as of the end of the month immediately preceding the approval of the loan scheme shall likewise be paid in equal monthly ' settlement 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

Annex A 3.5. 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 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 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), agrei:ing 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. 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.

Annex A 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. 4.1 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 Sienatori€s of the BSP Transaction Authorized BSP Officer Approval of the application to avail of the loan Director, DLC, or in her absence, any of restructuring scheme the DLC Deputy Directors Approval to release the collateral documents Director, DLC, or in her absence, any of the DLC Deputy Directors Execution of Cancellation of Deeds of Real Deputy Governor, Monetary Stability Sector Estate Mortgage, Assignment or Pledge 6. Other Provisions 6.1. Value-Date of the Settlement Scheme The value-date of the settlement value 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 2OL2 only.