Regulatory Relief for Banks/Non-Bank Financial Institutions with Quasi-Banking Functions Affected by the El Nino Phenomenon

BANeKo SerurnaL Ne plrleltrtas OFFICE OF THE DEPUTY GOVERNOR SUPERVISION AND EXAMINATION SECTOR MEMORANDUM NO. M-2016- OOo To Att BANKS/NON.BANK FINANCIAL INSTITUTIONS WITH QUASI- BANKING FUNCTIONS Subject : Regulatory Relief for Banks/Non-Bank Financial Institutions with Quasi-Banking Functions Affected by the El Nifio phenomenon The Monetary Board, in its Resolution No. 850 dated 13 May 2ot6, approved to grant regulatory and rediscounting relief measures to banks/non-bank financial institutions with quasi-banking functions (NBeBs) with head offices and/or branches located in areas which were affected by the El Nifro phenomenon, provided that a declaration of a state of calamity is issued by the National Disaster nirt n"or.iion Management council or the local sanggunian, upon the recommendation of the Regional or Local Disaster Risk Reduction and Management council. The relief shall be in the form of the following whenever applicable: a' During a temporary grace period for payment or upon their restructuring but subject to reporting to BSP, exclusion from the computation of past dueiatio of the loans of borrowers in affected areas which should have been reclassified as past due under Section X306 of the Manual of Regulations for Banks/4306Q of the Manual of Regulations for Non-Bank Financial Institutions on the declaration date of a state of calamity, including those loans becoming past due six (6) months thereafter: Provided, That the exclusion shall be for a period of one (1) year from declaration date of a state of calamity. For this purpose, BSP documentary requirements for restructuring of loans may be waived: Provided, That the bank/NBeB will adopt appropriate and prudent operational control measures; b. Reduction of the 5 percent general loan loss provision to L percent for restructured loans of borrowers in affected areas for a period of one (1) year from declaration date of a state of calamity; Non-imposition of penalties on legat reserve deficiencies of TBs/RBs/coop Banks/NBQBs with head offices and/or branches in the affected areas incurred for a period of one (1) year starting from reserve week following the declaration date of a state of calamity; A. MabiniSt., Malate 1004 Manila, philippineso(632)[email protected]

d. Moratorium without penalty on monthly payments due to the BSp, for a period of one (1) year from declaration date of a state of calamity, for banks with ongoing rehabilitation; and For all types of credits extended to individuals and businesses directly affected by the El Nifio phenomenon, 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 in offices located in affected areas as of declaration date of a state of calamity. For All Rediscountins Banks a. Upon application, granting of a 60-day grace period to settle the outstanding rediscounting obligations as of the declaration date of a state of calamity with the BSP of all rediscounting banks with head office, 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. 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 El Nifro phenomenon, subject to the terms and conditions stated in the implementing guidelines (Annex A). For information and guidance. I il:lt^m 11 rvrav zore

Annex A : IMPLEMENTING GUIDELINES ON THE RESTRUCTURING SCHEME COVERING THE REDISCOUNTING OBLIGATIONS WlrH THE BANGKO SENTRAL NG ptLtptNAs (BSp) OF REDISCOUNTING BANKS lN THE AREAS AFFECTED BY THE EL NINO pHENOMENON L ObiectiEg 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 the El Nifro phenomenon; I'2.To enable the rediscounting banks to liquidate their loan obligations with the BSp by way of restructuring; and 1'3' To ensure the coltection of the rediscounted,'loans which may become past due in view of tle damages caused by the El Niffo phenomenon, 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 affected by the El Nifro phenomenon and which have been or may be declared by the National Disaster Risk Reduction and Management Council or the local sanggunian, upon the recommendation of the Regional or Local Disaster Risk Reduction and Management Council as under a state of calamity. 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 avait of the restructuring scheme. 2'3' In addition to ltem No. 2.2, the Department of Loans and credit (DLC) shall evaluate each bank to determine if each would qualify for the restructuring. 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 Principol. Unpaid outstanding balance of the principal obligation in the books of accounts ofthe BSp.

t Accrued tntbresi 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 shali 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. c 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 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 defaurting bank. 3.8. Required Documents Qualified banks shail submit the foilowing 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 coilaterar deficiency 4. Application Procedures 4.1. Filing of Application The bank shall file with the DLC an application for restructuring outstanding rediscounting loans, supported by the following of its 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 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 shalt 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.

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 Approvalto 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 for a period of six (6) months reckoned from date of approval by the MB of the grant of the regulatory and rediscounting relief measures due to the El Niffo phenomenon.