JANUARY 11, 2010 (STAR) By Lawrence Agcaoili - The Bangko Sentral ng Pilipinas (BSP) is set to relax its rules that restrict lending to single borrowers in its bid to help diversified conglomerates raise funds to pursue much needed infrastructure projects.

BSP Deputy Governor Nestor Espenilla Jr. said in an interview with reporters that the review of the central bank’s single borrowers’ limit (SBL) rule was aimed at encouraging companies to participate in debt market forays to raise funds for their projects.

At the moment, the central bank restricts each bank’s exposure to a single borrower to only 25 percent of its capital.

But banks through the Bankers Association of the Philippines (BAP) have held a series of dialogues with the BSP to increase the ceiling to be able to address the borrowing requirements of large companies such as diversified conglomerate San Miguel Corp. and First Pacific’s Metro Pacific Investments Corp. that have ventured into capital intensive tollway business.

“We haven’t actually come to specific recommendations yet but we are looking at several aspects on how to accommodate the large financial requirements of big ticket infrastructure which are needed by the economy,” Espenilla stressed.

He pointed out that part of the review is whether big-ticket infrastructure projects being undertaken by large corporations would be included in the SBL

“There are many infra projects and big-ticket projects. Are they necessarily part of SBL? Now, if you look at the regulations strictly these should be included but what we are trying to explore is whether these infrastructure or other priority projects could have a separate limit,” the BSP official said.

He added that the review of the SBL would also help companies that are in merger and acquisition mode as part of the continuing consolidation of the business sector.

“The policy challenge that we are dealing with here is we are in a situation where major companies are in merger or acquisition mode which is resulting in the consolidation of the corporate sector. And these are good credit names so may implication in terms of the exposure of banks to those entities,” Espenilla said.

According to him, there is a need to review the SBL rule carefully as the rule guard against concentration of credit that could result to closure of several banks.

“You cannot close your eyes on these developments. We are studying this very carefully because the balance of that SBL is a prudential rule against concentration of credit. We have to balance requirements against systemic risks,” he said.

He added that the review would also take into consideration the increasing number of companies that are tapping the bond market to raise needed equity to bankroll their expansion activities.

Banks earlier asked the BSP to exclude the bonds that they acquire from the SBL computation subject to certain ratios. Banks were allowed a leeway equivalent to only about five percent of their capital for such transactions.

Last year, the BSP eased a rule that made it easier for companies bidding for power projects to avail of financing from banks by revising the DOSRI (directors, officers, stockholders and their related interests) regulations on bank loans to subsidiaries in the energy and power generation sectors.

It issued BSP Circular No. 654 amending the ceiling on loans, other credit and guarantees to subsidiaries and affiliates of banks/quasi-banks with businesses in energy and power generation by allowing a separate individual limit to loans of banks/quasi-banks.

The DOSRI limit is 25 percent of the net worth of the lending bank provided that the unsecured portion would not exceed 12.5 percent.

Government to allow duty-free sugar imports By Ma. Elisa P. Osorio (The Philippine Star) Updated January 11, 2010 12:00 AM

MANILA, Philippines - As sugar prices continue to increase, the government said they will be importing sugar immediately in order to provide affordable sugar to consumers.

In an interview over the weekend, Trade Secretary Peter B. Favila said that the government will allow the importation of sugar with tax exemptions because of rising prices.

“People should be able to afford reasonably priced sugar,” Favila stressed. Favila said that the solution is for government to buy sugar from other government overseas.

This means that the government will be relaxing all taxes and tariff for sugar importation to make it more affordable to the public. Favila said that they have already coordinated with the Department of Finance (DOF) to facilitate the tax perks.

Favila said that they would like to buy cheaper sugar from other governments immediately in order to address the needs of the local consumers because prices are now going up. “We want to formalize this immediately,” Favila said.

Favila said that in under no circumstances will they give subsidies to local sugar manufacturers in order to drive the prices down. “I have all the measures to help consumers afford cheaper goods. They (sugar manufacturers) can sell all their local produce overseas if they want.”

The Sugar Regulatory Authority (SRA) has already said that they fear prices can reach to up to P50 per kilo. However, the suggested retail price (SRP) for sugar is only P43. Sugar is currently being sold for P48 per kilo.

Sugar prices in the country have been going up because of rising global demand, limited supply and weather disturbances.

Trade Undersecretary Zenaida C. Maglaya said that they have already received a proposal to increase the SRP to P44 to P45 per kilo. The adjustment in SRP has not yet been approved because the DTI is still waiting for an endorsement from Agriculture Secretary Arthur Yap.

Maglaya said that they can easily import cheaper sugar even if the world prices are increasing. She noted that they were able to do it with rice before wherein the government bought rice from the Vietnamese government.

“If we were able to do it before we can do it again,” she said.

Chief News Editor: Sol Jose Vanzi

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