BSP eases bank lending rule
BusinessWorld | 05/04/2009 8:23 AM
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The Bangko Sentral ng Pilipinas (BSP) has relaxed a key requirement for companies borrowing money from banks.
During its weekly meeting on Thursday last week, the Monetary Board approved the yearlong suspension of a requirement mandating companies to present financial statements prepared by BSP-accredited auditors to banks when borrowing money.
"We did this because there still aren’t enough accredited auditors to cover all companies that want to borrow money," BSP Governor Amando Tetangco Jr. told reporters over the weekend.
"This is also one way for us to ease policies and encourage lending," he said.
The central bank chief said the decision to suspend the rule came after appeals from several commercial banks, which have found it difficult to meet this requirement.
"What we have seen is more than one-third of corporate borrowers — top 10,000 corporate borrowers — cannot comply with the requirements of submitting financial statements audited by accredited auditors," he said.
Conversely, banks have also been discouraged from lending money to corporates without audited financial statements, not because of default risks, but because of the penalties they would incur if caught by the regulator.
"The fact is there are companies that have not been able to comply, so banks risk violating regulations when they lend to these companies," he said.
"But this does not mean they no longer have to submit financial statements," Tetangco said.
He said financial statements will still be required from borrowers, but these need not be prepared by accredited auditors.
"This should ease the requirements so banks should be able to lend to companies whose financial statements are not audited by external auditors," he said.
There are currently less than a thousand auditing firms accredited by the BSP today, he said, stressing that these have not been enough to serve all companies seeking loans.
"We hope to increase the number of accredited auditors in a year’s time," he said, without giving specific targets.
One solution, he said, is the cross-recognition of auditors accredited by the financial system’s three regulators, the BSP, the Securities and Exchange Commission and the Insurance Commission.
He said each regulator accredits auditing firms for the respective institutions they oversee.
He said the three regulators, which, together with the Philippine Deposit Insurance Corp., make up the Financial Sector Forum, would recognize the accreditation of auditors done by their fellow agencies.
Early last month, Philippine National Bank Chief Executive Officer Omar Byron Mier asked the BSP to suspend until 2012 a provision in circular 439, issued in 2004, requiring corporate borrowers with total assets of more than P15 million to use accredited auditors only when preparing their financial statements. Mr. Mier cited the scarcity of accredited auditors as the reason for his plea.
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