by Lee C. Chipongian February 22,
2016
Offshore borrowings for
power-related infrastructure projects, even without guarantees either by
government or private banks, are no longer capped by ceilings.
The Bangko Sentral ng Pilipinas
(BSP) recently liberalized the foreign exchange policy rules on banks’ foreign
borrowing so long as this will be used to fund energy projects for the benefit
of the whole country.
What the BSP did was to remove the
previous requirement of acquiring prior BSP approval for the offshore
borrowings of “purely private sector” energy-related loans.
“Not all infrastructure projects are
exempt,” clarified BSP Deputy Governor Diwa C. Guinigundo. “Only those loans
for power project financing that are not guaranteed by banks/the public sector
can be directly obtained without prior BSP approval.”
More importantly, Guinigundo said
that “no limits apply for these loans.” But, he added, “however the borrowings
must subsequently be registered with BSP to allow debt servicing to be funded
with FX (foreign exchange) resources of the banking system.”
Guinigundo also said that the
registration of planned offshore borrowing must still be applied for after the
loan signing and use of loan proceeds.
The BSP has updated and adjusted
policies in the past to encourage investments in the government’s
public-private participation (PPP) program.
The most significant change
implemented was when it increased banks’ single borrower’s limit (SBL) by 25
percent until December, 2016.
It was in 2010 that the BSP first
revised the SBL rules and granted separate SBL of 25 percent of the net worth
of the lending bank to corporations undertaking infrastructure projects. The
BSP however, as a precaution, imposed the separate SBL to infrastructure loans
for a period of three years only or until the end of 2013, and later extended
this for another three years or up to the end of 2016.
The SBL limits lending of a bank to
a single client to only 25 percent of their capital. As a general rule, banks
should spread their risks. By capping lending to a single client, the potential
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