BSP expands calamity relief for banks, borrowers

MANILA, Philippines —  The Bangko Sentral ng Pilipinas (BSP) has bolstered its regulatory relief framework for the banking industry, providing a broader set of concessions aimed at assisting both financial institutions and their clients severely impacted by calamities. The new guidelines, formalized under Circular 1221, Series of 2025, are intended to support economic recovery in areas placed under a state of calamity.

The Monetary Board approved the amendments to the guidelines on the grant of regulatory relief measures, which were originally provided under Section 1151 of the Manual of Regulations for Banks.

“The amended guidelines provide additional regulatory relief measures to banks to further support them in their recovery from calamities and enable them to provide prompt and direct relief to affected borrowers and other stakeholders,” the BSP said.

The updated policy is comprehensive, offering several key measures directly benefiting borrowers located in affected areas. Central to the relief package is the authorization for banks to grant a temporary grace period for loan payments.

“Banks may grant a temporary grace period of up to six months to borrowers adversely impacted by calamities in declared affected areas,” the central bank said.

Critically, the circular mandates that “no interest on interest, penalties, fees or other charges shall be imposed on the borrower during the grace period.” This grace period may cover all outstanding loans classified as current prior to the calamity’s inception date.

For the agricultural sector, which is particularly susceptible to weather-related disasters, the policy introduces an even longer deferment period. Banks are “encouraged to grant deferment of loan payments for all agricultural loans classified as current prior to the inception date of the calamity.”

The deferment for borrowers directly engaged in crop production can range from six to 12 months, with possible extensions granted on a case-by-case basis to align with the production or crop rehabilitation cycle.

Beyond direct client relief, the new circular introduces significant regulatory leeway for financial institutions to manage the impact of losses.

One of the most data-driven measures is the temporary exclusion of affected accounts from problem loan computations.

“Banks may exclude the loans of borrowers who were adversely impacted by calamities in declared affected areas, from the computation of past due and non-performing loan ratios upon the grant of a temporary grace period for payment or restructuring,” the BSP said.

This exclusion remains in effect for one year from the inception date of the calamity, although it may be extended for agricultural loans. The adjusted ratios shall be used for supervisory purposes, including the determination of compliance with minimum prudential requirements.

The relief package also provides specialized support for smaller institutions. For thrift, rural and cooperative banks, the BSP allows for the “staggered booking of allowance for credit losses” over a maximum period of three years, subject to prior evaluation and approval.

Furthermore, these same institutions are granted a “waiver of monetary penalties for delayed submission of supervisory reports” for a period of up to six months from the calamity’s inception date.

The policy underscores the systemic importance of supporting the financial system during periods of disruption.