BSP board enhances OFW loan policy
Credit to Author: Mayvelin U. Caraballo, TMT| Date: Sun, 01 Dec 2019 16:10:30 +0000
MONETARY authorities have enhanced the rules on consumer loans for overseas Filipino workers (OFWs) and on the issuance of long-term negotiable certificates of time deposits (LTNCTDs) to promote financial inclusion and the development of capital market.
In a statement over the weekend, the Bangko Sentral ng Pilipinas (BSP) announced that its policy-making Monetary Board now allows banks to grant peso consumer loans for OFWs without prior central bank approval.
The enhanced policy is meant “to facilitate the access of OFWs to bank credit… in line with the BSP’s financial inclusion and empowerment agenda.”
The revised guidelines will liberalize the rules limiting the grant of peso consumer loans to certain types of visa holders, the central bank added. Except for residential real estate and housing loans, peso consumer loans may also be extended to all eligible foreign nationals with valid visa issued by relevant Philippine authorities.
Embassy officials and employees based in the Philippines are also allowed to avail any type of peso consumer loans.
“The enhancements are premised on the banks’ continued adherence to sound credit underwriting practices and effective control measures in managing risks involved in granting peso consumer loans to OFWs and eligible foreign nationals,” the Bangko Sentral added, emphasizing the new guidelines promote greater access to bank financing for these borrowers while expanding and broadening market segment for banks.
In a separate statement, the BSP said the enhanced rules on the issuance of LTNCTDs, bonds and commercial papers allow related companies of the issuing universal/commercial banks (U/KBs) and quasi banks (QBs) to underwrite or arrange the said financial instruments subject to certain conditions.
“Said enhancement is aimed at contributing to the development of the capital market,” it highlighted.
The amended rules require that there are other third party underwriters/arrangers that are not related in any manner to the issuing U/KB or QB. The parties shall ensure that an objective conduct of the due diligence review is not undermined and that appropriate safeguards and controls on related party transactions shall be instituted to prevent conflict of interest on the arrangement.
“These prudential reforms are aimed to promote efficiency in the issuance of the said instruments by U/KBs and QBs and at the same time protect the interest of the investing public,” the central bank added.