Regulatory Relief for Banks Affected by Typhoon "Lawin"

BANGKO SeNTRIL NG PILIPINAS OFFICE OF THE DEPUW GOVERNOR SUPERVISION AND EXAMINATION SECTOR MEMORANDUM NO. M-2016. O2O To ALL BANKS Subject Regulatory Relief for Banks Affected by Typhoon "Lawin" The Monetary Board, in its Resolution Nos. 201.8 and 2159 dated 11 November 2016 and L December 20L6, respectively, approved to grant temporary regulatory and rediscounting relief measures to banks with head offices (HOs) and/or branches/extension offices/microfinance-oriented banking offices (MBOs) located in the areas which were devastated by Typhoon "Lawin", based on Situation Report No. 9 dated 25 October 2OL6 of the National Disaster Risk Reduction and Management Council, as follows: Region Areas I llocos Norte, llocos Sur, La Union, and Pangasinan tl Cagayan, lsabela, Nueva Vizcaya, and Quirino ilt Aurora, Bataan, Bulacan, Nueva Ecija, Pampanga, Tarlac, and Zambales IV.A Batangas, Quezon, and Rizal V Camarines Norte and Sorsogon Cordillera Autonomous Abra, Apayao, Benguet, lfugao, Kalinga, and Mountain Region (CAR) Province The temporary relief shall be in the form of the following whenever applicable: For Thrift Banks (TBs) -rrral Banks (RBs) ''ooperative Banks (Coop Banks) a. During the temporary grace period for payment or upon their restructuring and subject to reporting to 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 (as amended by Circular No. 855 dated 29 October 2OL4l on L9 October 2016 (the date when Typhoon "Lawin" made its first landfall) and those becoming past due up to 31 October 20L7, from the computation of pDL ratio; and for this purpose, waiver of BSP documentary requirements for restructuring of loans: Provided, that the bank will adopt appropriate and prudent operational control measures; b. Reduction of the 5 percent general loan loss provision to 1 percent for restructured loans of borrowers in affected areas from 19 October 2016 to 31 October 2OL7; A. Mabini St., Malate 1004 Manila, Philippineso( 632]|[email protected]

c. Non-imposition of penalties on legal reserve deficiencies of TBs/RBs/Coop Banks with HOs, and/or branches/extension offices/MBOs in the affected areas incurred starting from reserve weeks ended 25 October 2016 to 25 April 2OL7; d. Moratorium without penalty on monthly payments due to BSP until 30 April 2Ot7 for banks with ongoing rehabilitation programs upon filing of application for extension/rescheduling with the Department of Loans and CrediU 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 19 October 2015; and f . Non-imposition of monetary penalties for delays incurred in the submission of all supervisory reports due to be submitted from L9 October 2016 to 30 April 2OI7. 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 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 Rediscountins Banks h. Granting of a 50-day grace period to settle the outstanding rediscounting obligations as of 19 October 2015 with BSP of all rediscounting banks with HOs, or with branches/extension offices/MBOs or with end-user borrowers in the affected areas except those with serious violations or findings with the BSP SES; and In addition to above, allowing the redlscounting 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 (Annex "A"). For information and guidance. Deputy Governor O( December 2016 Page 2 ot 2

Annex "A" IMPLEMENTING GUIDELINES ON THE RESTRUCTURING SCHEME COVERING THE REDISCOUNTING OBLIGATIONS WITH THE BANGKO SENTRAL NG PILIPINAS (BSP) OF REDISCOUNTING BANKS IN THE AREAS AFFECTED BY TYPHOON 'LAWIN" 1. 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 Typhoon "Lawin"; 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 damages caused by Typhoon "Lawin", 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 "Lawin" based on Situation Report No. 9 dated 25 October 2016 of the National Disaster Risk Reduction and Management Council, as follows: Region Areas llocos Norte, llocos Sur, La Union, and Pangasinan tl Cagayan, lsabela, Nueva Vizcaya, and Quirino ill Aurora, Bataan, Bulacan, Nueva Ecija, Pampanga, Tarlac, and Zambales IV-A Batangas, Quezon, and Rizal V Camarines Norte and Sorsogon Cordillera Autonomous Abra, Apayao, Baguio City, Benguet, lfugao, Kalinga, Region (CAR) and Mountain Province 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 Investigation shall not be qualified to avail of the restructuring scheme. 2.3. In addition to ltem 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 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. 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 amortizatlon.

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. 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), 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.

. 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. 4.1 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 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 Deputv Directors Execution of Cancellation of Deeds of Real Deputy Governor, Monetary Stability Sector Estate Mortgage, Assignment or Pledge 6. 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. 6.2. Effectivity Date The loan settlement scheme shall be made available up to 30 April 2OI7 only'