MICROCAPITAL BRIEF: Bangko Sentral ng Pilipinas (BSP) Places New Restrictions on Lending to Related Parties by “Microfinance-Oriented Banks” in the Philippines

Bangko Sentral ng Pilipinas (BSP), the central bank of the Philippines, has imposed a conflict-of-interest restriction on 18 thrift and rural banks that have added microfinance operations through affiliated nongovernmental organizations (NGOs) and foundations in an effort to limit the credit available to directors, owners, stockholders and related interests (DOSRIs). These institutions can lend no more than ten percent of the bank’s net worth to any one individual or affiliate with DOSRI status, of which up to 50 percent can be unsecured. In addition, no more than 20 percent of the bank’s net worth can be allocated to DOSRIs.

The regulation is meant to protect customer savings by preventing insiders and affiliates from taking excessive risks with the banks’ capital. Although the DOSRI limit has long applied to commercial banks, this is reportedly the first effort to monitor insider activity in the microfinance sector.

By Rohan Trivedi, Research Associate

About Bangko Sentral ng Pilipinas (BSP):
Bangko Sentral ng Pilipinas (BSP) is the central bank of the Republic of the Philippines. Established in July 1993 under the provisions of the 1987 Philippine Constitution and the New Central Bank Act of 1993, BSP took over from the Central Bank of Philippines as the country’s central monetary authority. Headquartered in Manila, BSP has three regional offices performing cash operations and eighteen branch offices. BSP participates in advocacy programs concerning microfinance, financial education and consumer protection.

Sources and Additional Resources:

[1] Manila Bulletin Publishing Corporation: “NGO banks slapped DOSRI limit”, http://www.mb.com.ph/articles/323387/ngo-banks-slapped-dosri-limit

MicroCapital Universe Profile: Bangko Sentral ng Pilipinas (BSP), https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Bangko+Sentral+ng+Pilipinas+%28BSP%29

Browse the MicroCapital Universe and add your entry to the wiki at https://www.microcapital.org/microfinanceuniverse/

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