BSP Publishes Framework for Large Exposure Monitoring Threshold

Prudential framework for large exposures

The Monetary Board approved amendments to the prudential guidelines on large exposures as embodied under Section 361 of the Manual of Regulations for Banks and Section 341-Q of the Manual of Regulations for Non-Bank Financial Institutions (MORNBFI). The circular shall take effect fifteen calendar days following its publication either in the Official Gazette or in a newspaper of general circulation. The circular highlights the following key points:

• The large exposures framework shall be applicable to all universal/commercial banks and their subsidiary banks and quasi-banks or "covered banks/quasi-banks". Large exposures of covered banks/quasi-banks shall be computed and compared with Tier 1 capital on both solo and consolidated bases.
• Covered banks/quasi-banks shall comply with the large exposures monitoring threshold of 25% of Tier 1 capital, on a solo and consolidated basis.
• The large exposures monitoring threshold shall be implemented to protect covered banks’/quasi-banks’ solvency from maximum possible losses in case of sudden failure of a counterparty or group of connected counterparties and to facilitate monitoring by BSP of concentration risks in the financial system.
• Covered banks/quasi-banks shall consider the large exposures monitoring threshold at the time of grant of new loan, credit accommodation, or guarantee, as well as renewal, restructuring or refinancing of existing credit exposures.
• Covered banks/quasi-banks shall report to BSP on a semi-annual basis or every June 30 and December 31 of each year, its large exposures on both solo and consolidated bases using the prescribed format (Appendix A of the circular).
• The report on large exposures shall be considered a Category A-1 report and shall be electronically submitted to the Department of Supervisory Analytics of BSP within fifteen banking/business days from end of the reference semester.

Amendments to minimum capitalization of rural banks

The amendments to the minimum capitalization of rural banks which will enable them to enhance their risk management systems, upgrade resources and manage operational costs, meet prudential standards, and accelerate digital transformation. This is part of the initiatives under the Rural Bank Strengthening Program which aims to enhance the operations, capacity, and competitiveness of rural banks. The minimum capital levels of rural banks are PHP 50 million for head office only and those with up to five branches; PHP 120 million for those with six to ten branches; and PHP 200 million for those with more than ten branches. Affected rural banks, including those which were already authorized by the Monetary Board to establish a rural bank, shall be given five years to comply with the new minimum capital requirements by referring to the available options under the Rural Bank Strengthening Program such as merger/consolidation, acquisition/third party investment, voluntary exit/upgrade of banking license, capital build-up program, and supervisory intervention. The circular shall take effect fifteen calendar days following its publication either in the Official Gazette or in a newspaper of general circulation. 

Related Links

• Circular on Prudential Framework for Large Exposures
• Press Release on Minimum Capitalization of Rural Banks
• Circular on Minimum Capitalization of Rural Banks
• Press Release on Digital Banks

Keywords: Asia Pacific, Philippines, Banking, Digital Banking, Regulatory Capital, Basel, Reporting, Large Exposures, BSP