Landbank, DBP seen getting BSP reprieve on Maharlika investments

The Bangko Sentral ng Pilipinas (BSP) is amenable to granting a temporary reprieve to Land Bank of the Philippines and Development Bank of the Philippines (DBP) from the minimum capital requirements set by regulators after the two state-run financial institutions made contributions to the Maharlika Investments Fund (MIF). Bangko Sentral ng Pilipinas Governor Eli Remolona Jr. said that the amount that Landbank and DBP contributed to the MIF reduced the banks’ liquidity, which might make them noncompliant with the capital requirements set by regulators. But Remolona clarified that both banks were so far fully compliant with such requirements, even after making the contribution to the MIF. Last Sept. 14, Landbank remitted to the Treasury its P50-billion contribution to the MIF while DBP turned in P25 billion. “In principle we can provide forbearance, which allows them not to comply for a period of time,” the BSP chief said. “But they will be expected to comply at some point [because] forbearance is always temporary.” Forbearance in banking involves granting concessions to borrowers who are unlikely to be able to repay their loans under the existing terms and conditions. Forbearance measures can take the form of refinancing or restructuring, or modifying the terms and conditions. “They are providing essentially capital which reduces their equity [and] may put them noncompliant with our capital requirements,” Remolona noted, explaining the effect of the banks’ investment in the MIF. “That’s mainly the form of relief they want,” he said. Maria Cynthia Sison, director of the BSP’s supervisory policy and research department, noted that while Landbank and DBP were still compliant with BSP requirements, they were asking for regulatory reprieve because “they don’t want their capital position to decline substantially because of [their MIF contribution].” Capital adequacy Michael de Jesus, president and chief executive of DBP, told the Inquirer that both banks requested for regulatory relief from the BSP as a “preemptive” measure. He said the relief that DBP was asking was related to the BSP regulation on the computation of the bank’s capital. “We seek relief that our contribution (to the MIF) will not be deducted from capital,” De Jesus said. Based on BSP regulations, all investments of banks, be it to allied or nonallied undertakings, will be fully charged against a bank’s capital. This means the investment of DBP and Landbank in the MIF will be deducted from the banks’ capital when they compute their capital Read more at: inquirer

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