BSP Amends Rules On Mandatory Development Financing

• Jurisdiction: Filipinas
• Law Firm: SyCip Salazar Hernandez & Gatmaitan
• Subject Matter: Finance and Banking, Insurance, Real Estate and Construction, Compliance, Financial Services, Commodities/Derivatives/Stock Exchanges, Insurance Laws and Products, Land Law & Agriculture
• Author: SyCip Salazar Hernandez & Gatmaitan
• Published date: 07 August 2023

On June 9, 2023, the Monetary Board of the Bangko Sentral ng Pilipinas ("BSP") issued Circular No. 1174, amending the implementing regulations of the mandatory agricultural, fisheries and rural development financing contemplated by the Agriculture, Fisheries and Rural Development Financing Enhancement Act (Republic Act No. 11901 or the "Agri-Agra Reform Credit Act"). The implementing regulations were previously set out in BSP Circular No. 1159 dated November 4, 2022.

The Agri-Agra Reform Credit Act requires banks to set aside a minimum credit quota to finance the requirements of the Philippines' agricultural and fishing sectors. The statute repealed Republic Act No. 10000, which imposed a similar credit quota requirement. A general discussion of some of the more salient requirements under the Agri-Agra Reform Credit Act are discussed below.

1. What is the minimum agricultural and fisheries household rural development financing ("AFRD financing") requirement?
In line with the Philippine government's avowed policy of enhancing access of rural communities and agricultural and fisheries households to financial services and programs, the Agri-Agra Reform Credit Act provides that all banking institutions, whether government or private (except newly established banks for a period of five years from the date of commencement of the banks' operations) must set aside a credit quota (or a minimum mandatory AFRD financing requirement) of at least twenty-five percent (25%) of their "total loanable funds" generated from and after August 18, 2023 (the second year of effectivity of the Agri-Agra Reform Credit Act). The calculation of "total loanable funds" is discussed in item 4 below.

At least ten percent (10%) of banks' total loanable funds shall be made available for agrarian reform beneficiaries.

Banks need to submit quarterly reports on their compliance with the AFRD financing requirement to the BSP. Compliance is allowed on a "groupwide basis" (i.e., consolidation of parent/foreign bank branch and subsidiary banks that are at least majority-owned) and any excess compliance of any bank in the group may be used as compliance by any deficient bank in the same group.

2. How long will the AFRD financing requirement remain in effect?
Under the Agri-Agra Reform Credit Act, the AFRD financing requirement shall cease to have effect on the 10th year from approval of the statute (i.e., from July 28, 2022). As clarified in BSP Circular No. 1159, the AFRD financing requirement...