A BANK'S loans to the agriculture and the agrarian reform sectors, which
exceed the requirements of the Agri-Agra Reform Credit Law, can be used
to fill the deficiency of another bank, as long as the two belong to the
same banking group.
Bangko Sentral ng Pilipinas (BSP) Circular 736 dated July 20, 2011 but
published in a newspaper only on Friday, also provides the way to
compute a bank's total loanable funds, which will serve as basis for
determining how much the bank should set aside for loans to the
agriculture and agrarian reform sectors.
"The compliance with agri-agra mandatory allocations of funds under
Republic Act (RA) 10000 shall be allowed on a group-wide basis so that
excess compliance of any bank in the group can be used as compliance for
any deficient bank in the group," the circular read.
The subsidiary banks should be directly or indirectly majority owned by
the parent bank -- or head office in the case of foreign banks -- which
will be responsible for the entire group.
RA 10000 or the Agri-Agra Reform Credit Act of 2009, approved by then
Pres. Gloria Macapagal-Arroyo on February 23, 2010, amended Presidential
Decree 717 signed by then President Ferdinand E. Marcos on May 29, 1975.
It aims to increase credit to the agriculture and agrarian reform sectors.
The BSP, together with the Department of Agriculture and Department of
Agrarian Reform, issued last week the implementing rules and regulations
(IRR) of RA 10000. The IRR stated that the central bank shall issue the
guidelines on consolidated compliance and computation of total loanable
funds.
The law orders banks to set aside at least 25% of their total loanable
funds for agriculture and agrarian reform lending, of which 10% should
go to agrarian reform beneficiaries.
Total loanable funds, based on Circular 736, shall be computed as the
combined increase in total peso deposits, bills payable, bonds payable,
unsecured subordinated debt, redeemable preferred shares and total
equity accounts beginning April 20, 2010.
The increase in items like debt and equity securities, sales contract
receivable, accrued interest income, goodwill and other intangible
assets -- also beginning Apr. 20, 2010 -- shall be subtracted from the
items above. Provisions for liquidity equivalent to 15% of the net
increase in total peso deposits shall also be deducted.
Banks or cooperatives that want to be accredited by the central bank
under RA 10000 must submit a letter to the BSP's Supervision and
Examination Sector, as well as a notarized undertaking it will comply
with the central bank's regulations and a notarized certification that
its loan portfolio "is substantially agri-agra related."
The law provides ways to comply with the 25% requirement other than
actual extension of loans and purchase of eligible loans from other
banks. These alternative modes include paid subscription of shares of
stock in accredited rural financial institutions and investments in the
special deposit accounts of accredited rural financial institutions.
Accredited institutions, which may be a rural bank, a cooperative bank,
a farmers' cooperative or a mutual benefit association, will be given a
certificate of accreditation as long as their total loan portfolio is
higher than total investments and their credit exposure to the agri-agra
sector is higher than their exposure to other sectors. -- NJCM
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