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- Category: Top News
- Published on Thursday, 20 December 2012 21:08
- Written by Jun Vallecera / Reporter
The Bangko Sentral ng Pilipinas (BSP) agreed on Thursday to extend by another three years the exempt status of loans granted under the Public-Private Partnership (PPP) Program from the 25-percent borrowing ceiling.
The extension will allow lenders to set aside funds in excess of P850 billion that would have been the collective limit of their exposure to entities pursuing PPP projects had the BSP allowed the original 2010 circular to lapse a week from today.
“The Monetary Board decided to extend for another three years the original three-year period allowing a separate single borrower’s loan [SBL] limit of 25 percent of the net worth of the lending bank/quasi-bank for loans, credit accommodations and guarantees granted for undertaking infrastructure and/or development projects under the PPP Program of the government duly certified by the secretary of Socioeconomic Planning,” BSP Governor Amando M. Tetangco Jr. said.
SBLs are prudential measures designed to prevent the overconcentration of bank resources in any particular economic sector that could turn sour and start a panic.
With the SBL limit effectively waived in the pursuit of PPP, more of the banks’ P3.4-trillion total loan portfolio could be used to finance the buildup program and in the process help boost the country’s local output measured as the gross domestic product (GDP).
Tetangco said the original BSP Circular 700 issued in the year President Aquino came to power would have lapsed on the 28th of this month.
“However, due to the long and complex process involved in the awarding of PPP projects, very few projects were awarded subsequent to said BSP issuance. Several PPP projects are still in the pipeline,” he noted.
The cited complications effectively prevented the government from disbursing growth-boosting liquidity in the years after 2010, a development that analysts both overseas and domestic said was a key factor in the economy’s restrained performance since then.
Key PPP supporters such as Budget Secretary Florencio Abad have since explained the initial reluctance, saying it was important to ensure each component program was pursued in accordance with transparent and well-thought out governance standards.
As a result, the separate SBL window for PPP lending will remain open for another three years or until December 28, 2016, “to encourage the financial sectors’ participation in the PPP Program, particularly with respect to projects that are still in the pipeline,” Tetangco said.
The separate SBL window also provides the bank another field of endeavor that they could tap to the satisfaction of their shareholders and take away some of the edge off keen competition that bank executives like Aurelio R. Montinola III of the Bank of the Philippine Islands said have pinched bank profits even more this year.
Banks basically compete to obtain business from more or less the same economic sectors and from the same entities in an environment when the cost of money has proved low and therefore potentially less profits for each transaction.
Given the several hundred million pesos in funding that the PPP requires, the banks that remain the main source of funds even for projects of long gestation provide a ready and comparably cheap funding source for proponents.
The banks could provide support, for example, to the P43.4 billion or $1.01 billion four-lane, 47-kilometer Cavite-Laguna Expressway road project set to start early next year.
The banks could also chose to support the first phase of the P8.8-billion Philippine School Infrastructure Project awarded to Citicore Holdings Investments Inc., Megawide Construction Corp. and BF Corp-Riverbanks Development Corp. consortium as well.
(Mia Gonzalez)
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