BAP: Banks can handle 60-day debt reprieve

MANILA, Philippines — The country’s banking industry is strong enough to provide a 60-day reprieve on loan payments as provided under Republic Act 11494 or the Bayanihan to Recover as One Act (Bayanihan 2), according to the Bankers Association of the Philippines.

BAP president Cezar Consing said Philippine banks would continue to extend support mechanisms to various sectors negatively impacted by the coronavirus pandemic.

Consing, who is also president and CEO of Bank of the Philippine Islands, said one such support mechanism is a 60-day grace period on loan payments contained in the new law signed by President Duterte on Sept. 11.

“Only a strong banking system, which is fortunately what we have, can play such a role,” he said.

Latest data from the Bangko Sentral ng Pilipinas (BSP) showed total assets of Philippine banks increased by 8.4 percent to P19.07 trillion as of end-June from P17.59 trillion in end June last year.

Total resources of universal and commercial banks or big banks went up by 9.9 percent to P17.61 trillion from P16.02 trillion, while that of thrift or mid-sized banks slipped by 9.3 percent to P1.17 trillion from P1.29 trillion.

Bayanihan 2 directs all banks, financing companies, lending companies, real estate developers, insurance companies, pre-need companies, and other public and private financial institutions to grant a 60-day grace period for the payment of loans falling due on or before Dec. 31 without interests, penalties and other charges.

It allows the extension of the maturity of the existing, current and outstanding loans, including but not limited to salary, personal, housing, commercial, and motor vehicle loans, amortizations, financial lease payments and credit card payments.

On the other hand, banks and other non-bank financial institutions that agree to loan term extensions or restructuring will be entitled to regulatory relief as may be determined by the BSP.

These relief measures may include staggered booking of allowances for credit losses, exemption from loan-loss provisioning, exemption from the limits of real estate loans when application, exemption from related party transaction restrictions, and non-inclusion in the institution’s reporting on non-performing loans.

Philippine banks have been sacrificing higher earnings by raising their provision for bad loans amid the expected rise in defaults due to the pandemic.

The net income of the industry slumped by 29 percent to P86.05 billion in the first half from P110.97 billion in the same period last year.