Posted on
December 19, 2012 10:04:47 PM [ BusinessWorld Online ]
THE BANGKO
Sentral ng Pilipinas (BSP) has amended banks’ financial reporting guidelines to
better monitor their real estate exposure and bad loans.
Memorandum No. 58-2012, dated Dec. 17,
amended banks’ Financial Reporting Package “to allow for additional disclosures
on non-performing loans and contracts to sell,” the issuance read.
Banks are
required to report their financial health to the BSP on solo basis -- covering
the head office and its branches -- every month and on a consolidated basis --
covering the parent bank and its subsidiaries -- every quarter.
Under the
revised guidelines, banks are mandated to include in their balance sheets their
loans and receivables from Contract To Sell (CTS) financing.
CTS financing
is the “amortized cost of loans granted to developers of housing projects by
way of purchase by the bank of receivables from contracts to sell executed
between the developer and homebuyers.”
Prior to this
issuance, only the loans and receivables from CTS financing involving
socialized and low-cost housing were required by the BSP.
The new rules
bring the Financial Reporting Package in line with the central bank’s new
guidelines on CTS financing issued last month. There were no formal regulations
governing the scheme before that.
Among others,
the BSP required banks to deal only with licensed developers that have
profitable operations, sound finances and technical capability to deliver on
projects.
Projects must
be 70% completed for land development or at the “top-off” stage for condominium
developments.
CTS financing
can be granted only when homebuyers are not more than 65 years old at the time
of CTS maturity and are insurable. They must also hold a solid payment track
record with the developer for the past six months, and they must have made a
downpayment of at least 10% of the total contract price.
The BSP wants
to check banks’ exposure to the real estate sector to prevent the creation of
bubbles amid low interest rates and heavy foreign fund inflows.
Other
revisions to the Financial Reporting Package include a more detailed reporting
of non-performing loans, or obligations to banks unpaid at least 30 days after
due date.
All banks are
mandated to break down their loans according to their status: current; past due
but not yet non-performing; past due and already non-performing; and items in
litigation.
The breakdown
should cover peso accounts, foreign accounts, foreign currency deposit accounts
and foreign offices. It should also be applied to loans and receivables from
interbank loans, repurchase agreements and securities lending and borrowing
transactions.
Latest BSP
data showed that non-performing loans made up only 3.01% the total loan
portfolio of the Philippine banking system as of the first quarter. It was an
improvement from the 3.72% notched in the same period in 2011.
The revised
Financial Reporting Package will take effect on Jan. 1, 2013. -- Diane Claire
J. Jiao
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