Regulatory Relief for Banks Affected by Typhoon "Ineng"

BANGKO SENTNEL NG PII.IPINAS OFFICE OF THE DEPUTY GOVERNOR SUPERVISION AND EXAMINATION SECTOR MEMORANDUM NO. M-2015. 035 To : ALL BANKS Subject : Regulatory Relief for Banks Affected by Typhoon "lneng" The Monetary Board, in its Resolution No. 1543 dated 23 Septernber 2015, approved to grant temporary regulatory and rediscounting relief to banks with head offices (HOs) and/or branches/extension offices (EOs)/microfinance-oriented banking offices (MBOs) in the areas which were devastated by Typhoon "lneng" based on Situation Report No. 23 dated 08 September 2015 of the National Disaster Risk Reduction and Management Council, as follows: Region Areas llocos Norte, llocos Sur, La Union, and Pangasinan tl Batanes, Cagayan, lsabela, and Nueva Vizcaya ilt Bataan, Bulacan, Nueva Ecija, and Zambales IV-A Laguna IV-B Oriental Mindoro Cordillera Autonomous Abra, Apayao, Baguio City, Benguet, lfugao, Kalinga and Region (CAR) Mountain Province The temporary relief shall be in the following form, whenever applicable: During 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 under Section X306 of the Manual of Regulations for Banks (as amended by Circular No. 855 dated 29 October 2OL4l on 18 August 2015 (the date when Typhoon "lneng" made its first landfall) and those becoming past due up to 31 August 2OL6, from the computation of past due loan ratio; and for this purpose, waiver of BSP documentary requirements for restructuring of loans; provided that the bank will adopt appropriate and prudent operational controls; b, Reduction of the 5 percent general loan loss provision to 1- percent for restructured loans of borrowers in affected areas from L8 August 2015 to 31 August 2OL6; Non-imposition of penalties on legal reserve deficiencies of TBs/RBs/Coop Banks with head offices and/or branches/EOs/MBOs in the affected areas A. Mabini St., Malate 1004 Manila, Philippineso(632)[email protected]

incurred starting from reserve weeks ended 2l August 2OI5 to 25 February 2OL6; d. Moratorium without penalty on monthly payments due to the BSP until 29 February 201G for banks with ongoing rehabilitation programs upon filing of application for extension/rescheduling with the Department of Loans and Credit; 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 18 August 2015; and f. Non-imposition of monetary penalties for delays incurred in the submission of all supervisory reports due to be submitted from 18 August 2015 to 29 February 20L6. For All Banks a. 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 Rediscounting Banks a. Upon application, granting of a 60-day grace period to settle the outstanding rediscounting obligations as of 18 August 2015 with the BSP of all rediscounting banks with head offices, 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 b. ln 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 guideline's (Annex "A"). For information and guidance. l[r- q-A I A. ' DeputyFSPENIL lt\r€sroR Govern 07 octouer 2015

Annex t'A" THE IMPLEMENTING GUIDELINES ON THE RESTRUCTURING SCHEME COVERING (BSP) OF REDISCOUNTING OBLIGATIONS WITH THE BANGKO SENTRAL NG PILIPINAS REDISCOUNTING BANKS IN THE AREAS AFFECTED BY TYPHOON "INENG" 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 "lneng"; 1.2. To enable the rediscounting banks to liquidate their loan obligations with the BSP by way of restructuring; and past due in view 1.3. To ensure the collection of the rediscounted loans which may become quality of of the damages caused by Typhoon "lneng", and maintain if not improve the 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 "lneng" based on situation Report No' 23 dated 0g September 2015 of the National Disaster Risk Reduction and Management Council, as follows: Region Areas I llocos Norte, llocos Sur, La Union, lnqjqlgg:lngn tl Batanes, Cagayan, lsabell rn4 ltlugyl ylgyg ill Bataan, Bulacan, Nueva Ecija, an4 Zambales IV-A Laguna IV-B Oriental Mindoro Cordillera Autonomous Abr., Apayao, Baguio City, Benguet, lfugao, Kalinga Reeion (CAR) and Mountain Province 2.2. Rediscounting banks with serious violations or findings with the Supervision and Examination Sector (SES), and/or whlch 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. ln addition to ttem 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 years' The restructured loan shall have a maximum term of five 3.2, Amount to be restructured The amount to be restructured shall be equivalent to the following: o Principol. 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 the of the end of the applicable repayment or amortization date, Preceding approval of the loan restructuring' 3.3. Interest Rate principal balance of the The interest rate to be charged against the outstanding The interest shall be restructured loan shall be based on prevailing rediscount rate' 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 bank in equal 3.5.1. Settlement Value. The settlement value shall be paid by the monthlyamortizations;provided,that,theamortizationperiodshallnotexceed five Years, to wit: o Principal. The principal obligation shall be paid in equal monthly amortizationspIustheapplicablerediscountrate' o Accrued lnterest. The accrued interest on the principal obligation as of of the loan the end of the month immediately preceding the approval settlement scheme shall likewise be paid in equal monthly interest. amortizations. No interest shall be charged on the accrued within which 3.5.2. Grace period. The bank shall be given a grace period of six months 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 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. r 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), 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.

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 of the loan settlement scheme. Upon receipt of said advice, the bank shall: o Execute the applicable document under ltem No. 4.I 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 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 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 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. Effectivity Date The loan settlement scheme shall be made available up to 29 February 2016 only.