THE CENTRAL BANK has fine-tuned regulatory guidelines on debts left unpaid for a certain period of time to align with global standards and ease difficulties faced by financial institutions on their borrowers’ incapability to pay outstanding loans.
In a statement sent to reporters over the weekend, the Bangko Sentral ng Pilipinas (BSP) announced that its Monetary Board approved new policies to tweak its definition of past due and non-performing loans (NPLs), including restructured debt, set to be implemented by Jan. 1, 2018.
Under the regulator’s revised rules, a loan left unpaid on its contractual due date is considered to be past due the following day. However, banks will be allowed to give a grace period for their borrowers’ overdue loans for particular circumstances.
“However, BSFIs (BSP supervised financial institutions) are allowed to provide for a cure period policy on a credit product-specific basis within which clients may be allowed to catch up on a late payment without being considered as past due, provided that the cure period policy is based on actual collection experience and reasonable judgment that support tolerance of occasional payment delays,” the BSP said.
Meanwhile, an account or exposure is now considered non-performing — even without any missed contractual payments — when the bank deems it impaired under accounting standards, “classified as doubtful or loss, in litigation, and/or there is evidence that full repayment of principal and interest is unlikely without foreclosure of collateral.”
“All other accounts, even if not considered impaired, shall be considered non-performing if any contractual principal and/or interest are past due for more than 90 days, or accrued interests for more than 90 days have been capitalized, refinanced, or delayed by agreement,” the central bank added.
According to the BSP’s new definitions, daily, weekly and/or semi-monthly and microfinance loans with grace periods are considered past due on the 11th day after maturity, while monthly installment and quarterly, semestral, and/or annual debts are past due a day after their maturity date excluding any grace period if any.
“The revised policy also provides a clearer basis for a restructured loan as its definition now includes the purpose for restructuring, that is to lessen the financial difficulty of the borrower and maximize collection and realizable economic value on an obligation within a reasonable period of time,” the BSP said.
“To facilitate transition, BSFIs are given until Dec. 31 2017 to make the necessary revisions in their management information and reporting systems relating to their past due and non-performing exposures. Effective Jan. 1, 2018, past due and nonperforming exposures shall be mandatorily reported in accordance with the requirements of the revised policy,” it added. — J.M.D. Soliman
