By LEE C. CHIPONGIAN
May 8, 2011, 10:38pm
MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) is
tightening the rules on banks' microfinance non-governmental
organizations (NGOs) and related foundations by subjecting loans to
DOSRI (directors, officers, stockholders and related interests) ceilings
in a bid to check and reduce operational, governance and reputational risks.
Sources from the BSP's Supervision and Examination Sector (SES) said a
circular and a memorandum are being prepared to reinforce corporate
governance and to issue guidelines for banks with microfinance
operations and to clarify the business relationships between banks and
their related NGOs/foundations.
The new circular, specifically, will require that banks with related
NGOs/foundations will have to comply with the DOSRI rules. DOSRI
individual limit or ceiling is 10 percent and five percent for unsecured
limits, and aggregate 20 percent limit on loans, other credit
accommodations and guarantees granted by banks to their subsidiaries
and/or affiliates.
The proposed circular will not only redefine what related microfinance
NGOs/foundations mean, but will also prohibit bank officers from holding
any positions that may cause them to be involved in the daily
microfinance operations of related NGOs/foundations, a source said.
It was in 2001 when the BSP allowed banks to establish NGOs/foundations
which are involved in microfinance operations. These NGOs/foundations
are regulated financial institutions. This gave them authority to access
commercial capital and engaged in services such as savings mobilization.
However, sources said this authority resulted to both banks and their
related NGOs/foundations now sharing the same microfinance market, which
has "elevated risks" in its operation and governance.
The BSP is mostly concerned about the common board memberships of banks
and their NGOs/foundations, the improper use of bank resources and
control of loan portfolio. In particular, loans related to the
NGOs/foundations are not considered as part of DOSRI ceilings. The
financial assistance extended by banks' NGOs/foundations falls under
DOSRI loans. "(In fact) any loan accommodations should be (subject) to
DOSRI ceilings," said the source.
By BSP definition, microfinance NGOs/foundations refer to those
NGOs/foundations engaged in microfinance operations which are
incorporated by any of the stockholders, directors and/or officers of
related banks.
The circular will include the definition of banks' microfinance
NGOs/foundations as "related interests".
At the end of 2010, based on BSP data, there are 149 microfinance
engaged banks with exposures amounting to P3.85 billion, of which P1.5
billion are the savings component. Overall, there are 202 microfinance
operations in the
Philippines including micofinance-oriented thrift and rural banks. The
202 have total loans of P6.53 billion lent to 932,622 borrowers as of
December 30.
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CARLOS ANI
UNITED NATIONS ENVIRONMENT PROGRAMME (UNEP)
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Email: carlosani@seedfinance.net
Landline: +63495010127 Cellphone: +639152919580
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CONSULTING - http://www.carlosani.com
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