Bangko Sentral eases rules on lending to OFWs

The Monetary Board, the policy-making body of Bangko Sentral ng Pilipinas, approved the enhanced policy allowing banks to grant peso consumer loans to overseas Filipino workers without a prior approval in line with its financial inclusion and empowerment agenda.

It said in a statement over the weekend the enhancement aimed to facilitate the access of OFWs to bank credit.

The revised guidelines liberalized the rules limiting the grant of peso consumer loans to certain types of visa holders. Peso consumer loans, except residential real estate and housing loans, may also be extended to all eligible foreign nationals with valid visa issued by relevant Philippine authorities.

Embassy officials and employees based in the Philippines are also allowed to avail any type of peso consumer loans.

“The enhancements are premised on the banks’ continued adherence to sound credit underwriting practices and effective control measures in managing risks involved in granting peso consumer loans to OFWs and eligible foreign nationals,” the board said.

“The new guidelines promote greater access to bank financing for these borrowers, while expanding and broadening market segment for banks,” it said.

Meanwhile, the Monetary Board also approved the enhancements to the rules on the issuance of long-term negotiable certificates of time deposit, bonds and commercial papers that allow related companies of the issuing universal/commercial banks and quasi-banks to underwrite or arrange the said financial instruments subject to certain conditions.

“Said enhancement is aimed at contributing to the development of the capital market,” the board said.

The amended rules require that there are other third-party underwriters/arrangers that are not related in any manner to the issuing U/KB or QB.  

The parties should ensure that an objective conduct of the due diligence review is not undermined and that appropriate safeguards and controls on related party transactions should be instituted to prevent conflict of interest on the arrangement.

“These prudential reforms are aimed to promote efficiency in the issuance of the said instruments by U/KBs and QBs and at the same time protect the interest of the investing public,” the board said.

The board also approved an indefinite moratorium on the issuance of LTNCTDs which will commence on Jan. 1, 2021. Banks are given until Sept. 30, 2020 to submit their request for authority to issue LTNCTD.

“The moratorium is seen to shift the banks’ funding channel from LTNCTDs to bond issuances that is to likewise further deepen the local debt market,” the board said.

Topics: Monetary Board , Bangko Sentral ng Pilipinas , peso consumer loans , overseas Filipino workers , OFWs
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