BSP hikes real estate loan limit to 25%

MANILA– Philippine monetary officials have expanded the real estate loan limit for universal and commercial banks (U/KBs) from 20 percent to 25 percent, a move aimed at supporting the sector during the pandemic.

“The increase translates to additional liquidity for real estate lending amounting to around PHP1.2 trillion based on end-March 2020 numbers,” Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno told journalists in a Viber message Thursday.

In a press statement, the BSP said real estate loan limit for thrift banks (TBs) was also eased.

U/KBS and their subsidiary TBs are required to conform to the real estate stress test (REST) limit after assuming a 25-percent exposure to real estate.

Specifically, U/KBs and their subsidiary TBs are required to heed the 10-percent capital adequacy ratio (CAR) and 6-percent common equity tier (CET) 1 capital ratio while stand-alone TBs are required to meet the 10-percent CAR and 6-percent Tier 1 ratio.

The BSP said the new guidelines on computing the REST limits exclude residential real estate loans to individuals for their own company and foreclosed real estate property, which aims to allow banks to have exposure to the real estate sector “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,” the BSP said.

During a virtual briefing made through the central bank’s Facebook page Thursday, BSP Deputy Governor Francisco Dakila Jr.

said the slowdown in bank lending is expected because of the impact of the pandemic.

“This one (the easing of loan limits for real estate loans) is going to help support bank lending to the real estate sector,” he said.

He added bank lending continues to grow year-on-year, although at a slower pace because of weaker demand.