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BSP intensifies real estate exposure rules

By Prinz P. Magtulis (The Philippine Star) Updated August 24, 2012 12:00 AM

MANILA, Philippines - Measurements used to gauge banks’ exposure to the real estate sector have been expanded by the Bangko Sentral ng Pilipinas (BSP), which noted of the need for a more comprehensive data even as it stressed that real estate prices remained manageable for now.

 “The Monetary Board approved a more comprehensive method of measuring the real estate exposure of banks,” BSP Governor Amando Tetangco Jr. told participants of the 4th Annual Corporate Treasury and Chief Financial Officer Summit-Philippines held in Makati yesterday.

Specifically, exemptions to the exposure’s computation were scrapped, Tetangco said, while bank investments which shall later on finance “real estate activities” will now be included.

Banks’ property exposure is the proportion of total amount of real estate loans against their aggregate loan portfolio. This include bank credit that goes to the real estate sector such as those used by corporations to build condominiums.

Previously, BSP, under Circular 600 issued in 2008, excluded in the computation loans extended to individuals for purchase or construction of houses for own-occupancy and those used for low-cost housing projects.

These exemptions are now no longer valid, Tetangco said. He added that expanded rules will now also cover bank investments in equities and securities, “proceeds of which shall be used to finance real estate activities.”

“There are some forms of funding that go to the real estate sector that do not come in the form of loans. We want to capture that and see how much funding is really going to the real estate sector,” he explained to reporters after his speech at the summit.

 “We just want to get the complete picture of the exposure of banks to the real estate sector,” he added.

Banks will be required to submit quarterly reports of compliance to the new guidelines beginning next year, the BSP said.

Latest BSP data showed banks’ property exposure rose to 14.52 percent as of end-2011, up from 14.25 percent the previous year. While Tetangco said the figure remains below the BSP-mandated 20-percent cap, it will be good to monitor developments in real estate lending to avoid the formation of asset bubbles.

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