BSP to assess DBP’s regulatory relief extension

February 5, 2025 | 12:00am

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) will evaluate any request from the Development Bank of the Philippines (DBP) for an extension of its regulatory relief, but only if the justification is deemed strong and reasonable, an official said.

BSP Deputy Governor Chuchi Fonacier said that monetary authorities would conduct a thorough review if DBP would seek an extension of the regulatory relief given to them after contributing P25 billion to the Maharlika Investment Fund (MIF).

“Of course, they have to justify (their request) and then we need to assess if it’s reasonable,” Fonacier told reporters on the sidelines of the 2025 Media Information Session in Baguio City over the weekend.

DBP president Michael de Jesus earlier said that the state-owned bank may seek an extension of regulatory relief, which was initially granted under specific conditions and time limits.

The International Monetary Fund had also emphasized the importance of replenishing DBP’s capital, which was used for the initial funding of the MIF, and urged the bank to exit regulatory relief as soon as possible

Fonacier agreed with the IMF’s stance that regulatory relief should be time-bound to ensure a level playing field in the banking sector.

“Of course I agree, but all this regulatory relief is time-bound. Now, once they request for more time, that’s where we assess if it’s justified to extend,” she said.

Currently, DBP’s regulatory relief is reviewed on an annual basis, whereas Land Bank of the Philippines has a three- to four-year timeline.

Fonacier said their cases differ in terms of size, mandate and financial conditions.

She also said that the BSP considers several factors when assessing a request for regulatory relief extension. These include capital adequacy, loan portfolio performance, past due and non-performing loan (NPL) ratios and exposure to specific industries.

“The conditions they are in, aside from being time-bound, are also pegged to certain metrics,” she said. “So we’ll go back to those metrics to see if the extension is justified.”

Fonacier said that while BSP remains open to evaluating requests, the justification must be compelling.

“It can’t be automatic... it’ll have to be a very strong justification,” she said.

One of the key concerns surrounding regulatory relief extensions is the potential creation of moral hazard, where banks may become overly reliant on regulatory leniency.

Fonacier said the BSP carefully weighs such risks.

“That’s where our assessment comes in, we have to assess if it’s justified. There could be factors beyond their control, such as the condition of a particular industry they are exposed to,” she said.

“But of course, we guard against moral hazards,” she added.