BSP eyes SBL increase for green projects

THE CENTRAL BANK is proposing an additional single borrower’s limit (SBL) of 15% for loans meant to finance green projects and a reserve requirement (RR) rate of zero percent for sustainable bonds.

The draft rules posted on the Bangko Sentral ng Pilipinas’ (BSP) website amend sections 362 and 251 of the Manual of Regulations for Banks that cover exposure limits to a single borrower and reserves.

“This measure aims to support the financing of green and sustainable projects, including transition activities that contribute to the achievement of the National Government’s (NG) climate commitments and sustainable development goals as laid down in the Philippine Development Plan and Nationally Determined Contributions,” the BSP said in the draft circular. 

The amendments are also part of the BSP’s 11-point Strategy for Sustainable Central Banking, it added.

Stakeholders are given until June 23 to give their feedback on the proposed circular. 

The SBL is a ceiling on the amount of loans, credit accommodations and guarantees a bank or financial institution can extend to one borrower meant to prevent over-concentration of risk.

Currently, the SBL of all banks stands at 25%. However, in January, the BSP said it will implement a new framework that will raise the SBL to 30% by July 1.

According to the draft, the current SBL of 25% may be increased by an additional 15%, which will only be for loans financing green projects, including the transition activities to decarbonization. 

The financing should meet the categories laid out in the NG’s Sustainable Finance Framework, Strategic Investment Priority Plan on Green Ecosystems, the country’s Sustainable Finance Guiding Principles, or the sustainable finance taxonomy guidelines.

Meanwhile, the bank must ensure that the project does not violate any Philippine laws or any environmental regulations. It will also maintain the standard prudential controls designed to protect creditors’ interests in the grant of financing to sponsors.

If approved, the additional 15% for loans for sustainable projects will be in effect until Dec. 31, 2030.

The credit risk concentration arising from total exposures to all borrowers for sustainable projects will also be evaluated by the lender in its internal assessment of capital adequacy relative to its overall risk profile and operating environment.

“The amount of any new loan, credit accommodation, or guarantee extended as well as the restructured, renewed, and refinanced existing credit exposures, beginning 01 January 2031 shall not exceed the prescribed SBL of 25%,” the BSP said.

“Outstanding loans, credit accommodations, or guarantees as of 31 December 2030 that are granted using the additional SBL of 15% may be maintained. The lending bank shall honor the term of such loans or credit accommodations until the maturity period,” it added.   

Meanwhile, the zero percent reserve requirement rate against green bonds will be effective until Dec. 31, 2025.

Sustainable bonds include existing and new issuance of green, social, sustainability and other sustainable bonds as defined by the Securities and Exchange Commission or other international standards acceptable to the market.

This may include the issuances of the International Capital Markets Association or endorsement of the ASEAN (Association of Southeast Asian Nations) Capital Markets Forum. — Keisha B. Ta-asan