Article by Prinz Magtulis

The Bangko Sentral ng Pilipinas (BSP), under Circular 803 dated July 5, allowed for lenders to exceed their single borrowers limit (SBP) whenever they decide to lend to oil companies. The SBL is created by the BSP as a tool to make sure that banks do not lend too much money to any entities. Basing from the regulations, banks are allowed to lend only up to 25 percent of the net worth of an individual or an entity in the economy. However, with the current program, lenders are allowed to contravene their SBL by adding 15 percent more whenever they fund for oil importations.

Although it may look as if the financial stability of banks would have adverse impacts, the BSP reprimanded that it would be avoided due to the increased exposure of the program. The possibility of concentrating the credit risk on oil companies can be reduced if a bank would be very keen in assessing its overall risk profile and management during the year that the program is being implemented. Also, there are other financing ways for oil firms to raise fundings, such as the capital market, as what BSP Deputy Governor Nestor Espenilla Jr. said.

The new circular generally proves how oil-based the Philippines is becoming due to the current high amounts oil importations. By the end of 2012, the Philippines imported around 338,400 barrels of oil per day, probably for production, manufacturing and service purposes. Moreover, the focus of the BSP to finance oil importations, which is the primary goal of this circular, can be positively taken considering the current governmental and political issues around the top oil-producing nations, particularly those in the Middle East. Funding the oil companies for their oil importations can also be a way of preparation in case any mischievous happenings may breakout in the Middle East and the oil production would be embargoed. 



Authors:
Del Rosario, Keren Michelle
Desamparado, Lorenze Matthew
Somes, Elliane




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