• By The Financial District


The Monetary Board approved amendments to the Bangko Sentral ng Pilipinas’s rules on real estate loan limits of universal and commercial banks (U/KBs) and thrift banks (TBs).

The measure aims to support growth in productive sectors of the economy amid the COVID-19 situation, including the real estate activities. It also encourages bank lending to households for the acquisition or construction of a residential real estate property.

Prior to the amendments, U/KBs were required to comply with a real estate loan limit of 20 percent of their total loan portfolio, net of interbank loans. This real estate loan limit has been increased to 25 percent.

U/KBs and their subsidiary TBs are also required to comply with the real estate stress test (REST) limits, after assuming a 25 percent write-off of real estate exposures, on both solo-and consolidated basis:

  1. 10 percent Capital Adequacy Ratio (CAR) and 6 percent Common Equity Tier 1 capital ratio (for U/KBs, and their subsidiary TBs), and

  2. 10 percent CAR and 6 percent Tier 1 ratio (for TBs that are not subsidiaries of U/KBs.

Under the new guidelines, the methodology for computing a bank’s REST limits was revised to exclude residential real estate loans to individuals for own occupancy and foreclosed real estate property.

The REST limits are implemented as soft limits such that a bank may maintain exposures to real estate for as long as it is able to demonstrate ability to manage risks. 

The forthcoming guidelines reinforce this approach by relating assessment of risks by a covered bank on its real estate exposure to its Internal Capital Adequacy Assessment Process or capital planning process. 

This ensures that a holistic approach is adopted by banks in the management of their risks vis-à-vis their capital position.