REGULATORY UPDATES

Cir. 730 (7.20.2011) - Updated Rules Implementing the truth in Lending Act to Enhance Loan Transaction Transparency

Objectives:

• Promote financial inclusion goals• Intensify consumer protection-

transparency• Facilitate healthy competition among FIs

and benefit the client as focus shifts on services

Main featuresAmendments to -• Sec. X305 (Interests and Other Charges) –

Added Ss X305.5 Method of computing interest - amortizations based on outstanding balance

• Sec. X307 (Truth in Lending Act Disclosure Requirements) - Changed definition of Finance Charge and Simple Annual Rate

Main Features

• Ss X307.2 - Information to be Disclosed• Ss X307.4 - Posters• Appendix 19 - Format of DS on

Loan/Credit Transactions

Expectation:

• Compliance: 01 July 2012 – The BSP is not inclined to extend the deadline

• RBAP info campaign – 8 March 2012• BSP/MFSG Road-shows – April to June

2012

Cir. 746 (3 Feb. 2012)3-Year Extension of Exemption of MSEs from Submission of

Add’l Doc. Requirements(Amendment of Ss X304.1 of the MORB)

Main Feature:•Loans to micro and small enterprises which are not specifically exempted from the additional documentary requirements specified under the third paragraph of this Subsection shall be exempted from said additional documentary requirement up to 31 December 2011.

EXTENDED TO 31 DECEMBER 2014

Cir. 747 (6 Feb. 2012)Revised Compliance Framework for Banks(Amendment to Sec. X180 of the MORB)

STATEMENT OF POLICY

•Promote safety and soundness of the banking system

•Maintain high standards and accepted practices of good corporate governance

•Put in place a robust, dynamically-responsive and distinctly-appropriate Compliance System

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Main Features

• Appointment of a Chief Compliance Officer (new) – no more concurrent Internal Auditor

- “simple” banks may appoint a non-executive director as concurrent CCO

• Focus of Compliance System on business risk• Formal status w/in the organization

(renumbered)• Basic elements of Compliance System

(renumbered)

Main Features

• Responsibilities of BOD and SM (renumbered)

• Outsourcing of risk assessment and testing (renumbered)

• Role and responsibilities of Compliance Function (deleted)

• For compliance on or before 1 July 2012

Cir. 748 (13 Feb. 2012)Micro-Agri Loans

(Amendment of Ss X361.7 of the MORB)

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Major ChangesSec. 2 - Minimum Criteria for FI’s Capacity1. To ensure financial capacity, managerial and

technical capabilities – should at ALL TIMES have -• CAMELS of 3; Management of 3• CAR of not less than 12%• No major supervisory concern/not for PCA• No arrearages on B/P (micro-finance) with

BSP/other creditors

Minimum Criteria:

BREACH???1. Given one examination cycle to correct; to

submit viable plan to rectify2. If still non-compliant:• Authority to offer micro-agri is suspended• Transactions limited to collection of

outstanding receivables

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Other Changes:•Amendment: Appropriate Risk Management – (2) adequate management information and loan tracking systems •Addendum: Sec. 5 – Other Micro-Agri ProductsNo inconsistent provision shall be allowed unless with prior BSP approval; provided additional risk is compensated by appropriate RMS

Basic Product Characteristics

• Purpose/Term – Farm activities, agri-business/ short-term

• Eligibility – multiple income generating activities, at least 2 years operating, good track of borrower

• Loan Amount – From small up to max of P150k• Loan Value – Based on cash flow analysis• Payment – Frequent amortization• Security – collateral substitutes may be required

More Queries???

BSP Micro-Small & Medium Enterprise Finance Specialist Group – Mr. Gerry

Butardo at TL (02) 7087701 Locals 2782 & 2340, DL (02) 7087397

Forbearance is NO LONGER acceptable

LET’S FIX IT !!!

BEFORE IT’S EVER TOO LATE !!!

Thank You !

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