Project Finance, Real Estate Under Close Watch

Published on: 25 Sep, 2017

The BSP or Bangko Sentral ng Pilipinas has started to closely watch the activities of Philippine banks. It is especially going through the banks' project finance and real estate exposures. The watchdog activity has intensified after a number of multilateral lending agencies and debt watchers have warned about the Philippine economy overheating to unsustainable levels. The action by the BSP has been formally approved by the central bank's monetary board. Reporting requirements have become more exacting. Banks are needed to do more oversight when it comes to their project finance and real estate exposures.

Independent warning

A number of debt watches, including Fitch Ratings and Moody's Investor Services, along with the International Monetary Fund (IMF) have warned the Philippines that its economy is showing all signs of being overheated. The same conclusion has been arrived at by a number of investment banks, including Singapore's DBS Bank Limited. As per the new guidelines, all commercial or universal banks are needed to submit their reports on the project finance exposures. These includes proper information being filed on the kind of infrastructure project along with the project phase.

These enhanced reporting procedures form a component of the macroprudential toolkit being adopted by central bank's Monetary board. These are being used to increase the effectiveness of the assessment being done by the BSP when it comes to the exposures in the property sector.

Bettering surveillance quality

According to a document released by the BSP, the disclosure requirements by the banks was taken for better comprehension of their project finance and real estate exposures. A more deeper comprehension of such exposures will better the finance surveillance quality of the BSP . It will also permit the latter to adopt the few calibrated policy measures which will be targeted solely towards those areas which need a supervisory action.

According to the BSP, these slew of new measures will provide the regulator a much better understanding of the quality and the extent of exposures of the big banks towards project finance. This is specially valid as the the demand for financing of projects is anticipated to only increase. They will gain traction as Philippines moves towards its achieving of infrastructure aims. As per the regulator, the new report parameters will be implemented beginning from the quarter ending of June 2018. Before this happens, the BSP will administer a pilot run to be made for reporting period ending on March 2018.

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Marco Zhou

Email: Marco@financialinsiders.com

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