Regulatory Relief for Banks Affected by Typhoon "Juan"

ts""gfi" J'"h"t og Qiftpu"t MAYNILA, PILIPINAS OFFICE OF THE DEPUTY GOVERNOR SUPERVISION AND EXAMINATON SECTOR MEMORANDUM NO. M-201 0-O:g_ TO ALL BANKS SUBJECT : Regulatory Relief for Banks Affected by Typhoon ,,Juan" The Monetary Board, in its Resolution No. 1516 dated 2g october 2010 approved to grant temporary regulatory relief to banks with head offices and branches located in the following areas which were devastated by typhoon "Juan" based on the report of the National Disaster Risk Reduction and Management Council: . Region l: llocos Norte, llocos Sur, La Union and pangasinan; . Region ll: Cagayan, lsabela, Nueva vizcaya and euirino; . Region lll: Aurora, Bataan, Bulacan, Nueva Ecija, pampanga, Tarlac and Zambales; o Region lV-A: Cavite and Rizal; r Cordillera Administrative Region: Abra, Apayao, Benguet, lfugao, Kalinga and Mt. Province;and r NationalCapital Region: Manila . The temporary relief shall be in the form of the following whenever applicable: a. During a temporary grace period for payment or upon their restructuring and subject to reporting to BSP, exclusion of the loans of borrowers in affected areas, which should have been reclassified as past due loans under section X306 of the MORB on 18 october 2o1o and those becoming past due up to 31 December 2011, from computation of past due loan ratio; provided that BSp documentary re uirements for restructuring of loans for this purpose are waived; provided further that bank will adopt appropriate and prudent operational controls; PANANALAPING MATATAG, BANSANG PANATAG A. Mabini St., Malate 1004 Manila, Philippines o Trunkline (632) 524-7G11. URl:www.bsp.gov.ph . e-mait: [email protected]

Page2of2 b. Reduction of the 5 percent general loan loss provision to 1 percent for restructured loans to borrowers in affected areas from 1g october 2010 to 31 December 2011; c. Non-imposition of penalties on legal reserve deficiencies of RBsffBs/coop Banks with head office and/or branches in the affected areas incurred starting from reserve weeks ended 21 october 2010 to 21 April 2011 provided these reserye 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 30 April 2011 for banks with ongoing rehabilitation programs upon filing of appl ication for extension/rescheduling ; e. For all types of credits extended to individuals and businesses direcily 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 2010; f. Non-imposition of monetary penalties for delays in the submission of all supervisory reports due to be submifted from 18 october 2010 to 30 April 2011;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 plan (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 Rediscountino Banks a. Upon application, granting of a 60-day grace period to setile the outstanding rediscounting obligations as of 20 october 2010 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 SES; 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. D3 November 2010

il:"''f' IMPLEMENTING GUIDELINES ON THE RESTRUCTURING SCHEME COVERING THE REDISCOUNTING OBLIGATIONS WITH THE BANGKO SENTML NG PILIPINAS (BSP) OF REDISCOUNTING BANKS IN THE AREAS AFFECTED BY ryPHOON "JUAN" 1. Obiectives The objectives of the loan settlement scheme are as follows: ' To support the recovery efforts of rediscounting banks in the areas affected by 1'1 Typhoon "Juan" 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 damage caused by the typhoon, and maintain if not improve the qual1y 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 Typhoon "Juan" based on the report of the National Disaster Risk Reduction and Management Council dated 22 October 2010: . Region l: llocos Norte, llocos Sur, La Union, and pangasinan; r Region ll: Cagayan, lsabela, Nueva Vizcaya, and euirino; . Region lll: Aurora, Bataan, Bulacan, Nueva Ecija, pampanga, Tarlac, and Zambales: . Region lV-A: Cavite and Rizal; o Cordillera Administrative Region: Abra, Apayao, Benguet, lfugao, Kalinga, and Mt. Province; and o National Capital Region: Manila 2'2. Rediscounting banks with serious violations or findings with the Supervision and Examination Sector (SES), and/or which are cunently 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, the Department of Loans and Credit 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 Principal. Unpaid outstanding balance of the principal obligation in books of account of the BSP.

Annex A . Accrued lnterest. Unpaid interest due on the outstanding principaf 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 changed 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 lo its end-user bonowers 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: . Principal. The principal obligation shall be paid in equal monthly amortization 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 Perlod. 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: r Restructured promissory notes of end-user bonowers; . Hard collaterals owned by the bank such as bank premises and government securities; and . Other collaterals acceptable to the DLC 3.7. Default Gause r 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. . 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.

Annex A Pase 3 or 3 3.g. Required Documents Qualified banks shall submit the following documents: . 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 reslructuring of its outstanding rediscounting loans, supported by the following documents: e Resolution of the Board of Directors a) authorizing the bank to enter into a loan settlement anangement with the BSP, and b) designating authorized senior officers thereof. r The restruclured promissory notes of the end-user bonowers 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: r Execute the applicable document under ltem No. 4.1 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 Signatories 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 Govemor, Monetary Stability Sector Estate Mortgage, Assignment or Pledge 6. Other Provlsions 6.1, Value.Date of the Settlement Scheme The valuedate 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 30 April 2011 only.