DBP needs strong motivation for relief extension
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DBP needs strong motivation for relief extension

State -owned development bank in the Philippines (DBP) must provide strong justification for their appeal to extend the regulatory placement, according to a senior Bangko sentral ng Pilipina’s (BSP) official.

BSP’s Deputy Governor Chuchi G. Fonacier, who spoke to reporters on the sideline for a two-day media information session in Baguio, but said that the central bank is open to consider DBP’s request, but only if the bank gives a reasonable motivation.

“Openness to consider it (the supplement) is of course there because they can submit a (request), as long as they really should justify it,” said Fonacier, noting the need for a “very strong justification.”

DBP’s President and CEO Michael O. The Jesus previously stated that the bank will seek an extension of the regulatory placement “for comfort”, while the Land Bank of the Philippines (Landbank) CEO and CEO Lynette V. Ortiz said that the state bank no bank No longer need it.

The International Monetary Fund (IMF) recently noted the importance of DBP and Landbank that left regulatory relief to promote an even playing area.

Fonacier agreed to this point, but emphasized that regulatory relief is not a lifetime assessment; “It’s time -bound.” This, she argued, which is why the granting of relief to state -owned banks must be justified.

“Now what they say is when they ask for more time, this is where we go in to judge whether it is justified to extend,” Fonacier said.

She explained that Prudential Banking is the central bank’s main consideration when reviewing an appeal. If operations are not careful “it is no longer safe,” she noted.

In addition to caution, BSP will evaluate the banks’ capital adequacy, loan portfolio performance, non-performance loan (NPL) quota, risk exposures and other factors.

Foncier emphasized the crucial role for assessment before making any decision.

She claimed that factors beyond the control of DBP and Landbank, such as industry conditions, can affect their situation.

If appeals are justified, Fonacier said that the central bank considers them. “So there are many things to keep in mind, but of course we guard against moral dangers,” she said.

They said that the regulatory relief DBP gets from BSP annually, unlike Landbanks, which extends for three to four years.

Fonacier explained that the agreement “also depends on the condition and factors” that affect the banks.

“Landbank’s case is different, DBP’s case is different, that is why we cannot compare them, because initially their size is different. It differs from DBP, their confidence is different,” Fonacier said.

“We really look at it per institutional basis, but we also have to take a look at what is the impact on the whole system, because if it no longer results in an even game area, then there is something there,” she added.