Philippines: BSP issues memorandum on implementation of Bayanihan section 4 (uu) to recover as single act

In short

On September 18, 2020, the Bangko Sentral ng Pilipinas (BSP) issued Memorandum No. M-2020-068 applicable to all financial institutions supervised by the BSP (BSFI), which provides for the implementation of section 4 (uu ) of Republic Act 11494 otherwise known as “Bayanihan to recover in one act” (Bayanihan 2 Act).

The Bayanihan Law 2 was promulgated by President Rodrigo Duterte on September 11, 2020 and entered into force on September 15, 2020.

Highlights of the memorandum

The protocol obliges all BSFIs to comply with Section 4 (uu) of the Bayanihan 2 Law, which requires all covered institutions (e.g. banks, quasi-banks, finance companies, loan companies, real estate developers, insurance companies providing life insurance policies, pre-need businesses, entities providing internal financing for purchased goods and properties, asset and liability management companies and other financial institutions, public and private, including including the government services insurance system (GSIS), the social security system (SSS) and Home Mutuelle de Développement (Pag-IBIG Fund) to set up a 60-day mandatory one-time pardon period to all existing loans, in progress and in progress, and maturing on or before December 31, 2020.

The mandatory 60-day grace period applies to loans, including, but not limited to:

• salary loans;
• personal housing loans;
• commercial and motor vehicle loans;
• depreciation;
• finance lease payments;
• premium payments; and
• credit card payments.

During the 60-day mandatory grace period, OSFI will not charge or charge interest on interest, penalties, fees and other charges, thereby extending the maturity of the loans.

BSFIs are also prohibited from requiring their clients to waive the application of the provisions of the Bayanihan 2 Act. Any waiver previously executed by borrowers covering payments due until December 31, 2020 will be void.

Interest accrued for the mandatory 60-day one-time grace period may be paid by the borrower on a staggered basis until December 31, 2020, but does not prevent the borrower from paying full interest accrued to the new. due date.

OSFIs and borrowers are allowed to agree to each other: (a) a grace period greater than 60 days; and / or (b) payment of accrued interest on a phased basis beyond December 31, 2020. Banks and other non-bank financial institutions (NBFIs) that agree to extend or restructure term loans will be entitled to relief that may be determined by the BSP (such as, but not limited to, phased recognition of provisions for credit losses, exemption from loan loss provisioning, exemption from restrictions on related party transactions and non-inclusion in bank or NBFI reports on non-performing loans). Loan term extensions and restructuring in accordance with Article 4 (uu) of Bayanihan Law 2 are exempt from payment of documentary stamp duty.

Actions to consider

All Covered BSFIs must comply with the above requirements for granting their borrowers the mandatory 60-day one-time grace period under the Bayanihan Law 2.