RE loan ceiling may tighten

Published on Thursday, 11 October 2012 10:17

Written by Jun Vallecera / Reporter

THE 20-percent ceiling on bank loans to the real-estate sector may be recalibrated and tightened at some point forward should an ongoing evaluation merit such adjustment, the Bangko Sentral ng Pilipinas (BSP) said late on Wednesday.

At the 38th annual gathering of members of the Philippine Business Conference at the Manila Hotel, BSP Deputy Governor Nestor A. Espenilla Jr. emphasized the 20-percent limit still hold, but that banks and financial institutions have been asked to report on these activities more extensively now than had been done in the past.

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“For now the composition stays. What the BSP has done is ask banks to report more, in effect report all of their real-estate transactions including those to individuals. But that does not mean that’s inside the ceiling. We have not yet touched the ceiling,” Espenilla said.

The increased vigilance, he said, recognizes the key role played by real-estate lending in past banking crises that troubled not just individual economies but entire regions.

“Our objective right now is to have an accurate picture as to what extent in totality our banks—thrift, commercial and banking groups—are exposed to real estate. We will begin to get that data starting end of this year,” the deputy governor said.

Once the regulators obtain a better handle of what is going on in the sector, they will then be in position to decide whether macro prudential measures are required to correct the anomalies or imbalances, Espenilla said.

“These are all policy instruments of the BSP. We cannot rule out those things. But we need to also communicate our policy measures properly. Based on what we see, then we have to craft the appropriate policy. Remember, we have to balance because the economy needs to grow and the real estate is a legitimate investment area. We do not really want to suppress it necessarily,” Espenilla said.

How the ratio is calculated in relation to any bank’s loan portfolio may be redefined in response to findings expected when all bank data shall have been analyzed, he said.

“There are many ways to do it. We can redefine [how] the formula is calculated for one thing because right now it is the limit on the total loan portfolio for certain real-estate items. So there are options on how we can change that if necessary. I emphasize ‘if necessary,’” Espenilla said.

Previously, BSP Governor Amando M. Tetangco Jr. said the 20-percent real-estate limit under current regulations does not merely involve the outright exposure in relation to the total loan portfolio.

“The amount of the real-estate portfolio is adjusted based on long standing guidelines. For example, low-cost housing loans are taken out for purposes of the calculation. Under the adjusted calculation, we remain inside the 20-percent limit,” Tetangco said.

There had been recent guidelines issued by the Monetary Board in recent months “revisiting both the calculation and the data submission of banks...as proactive move that enables the BSP to align the limits to risk capital while providing for a more comprehensive view or real-estate financing,” Tetangco said.