BSP issues guidelines for 60-day debt reprieve

by Lawrence Agcaoili (The Philippine Star), 30 Sep 2020

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) has approved the guidelines of a new law extending a 60-day grace period for the repayment of all existing loans to ease the burden of consumers and companies severely affected by the COVID-19 pandemic.

BSP Governor Benjamin Diokno said the regulator has approved the implementing rules and regulations (IRR) of Republic Act 11494 or the Bayanihan to Recover as One Act (Bayanihan 2).

Diokno issued Memorandum 2020–074 enjoining all BSP-supervised financial institutions to send adequate notices to their clients that clearly communicate details of the implementation of the 60-day grace period for existing, current, and outstanding loans upon the effectivity of the law on Sept. 15..

According to the BSP, the reprieve is mandatory and that all institutions covered should implement a non-extendible one-time 60-day grace period for all existing, current and outstanding loans with principal or interest, including amortizations falling due on or before Dec. 31 this year.

“Loans shall include, but is not limited to salary, personal, housing, commercial, and motor vehicle loans, amortizations, financial lease payments and premium payments, as well as credit card payments,” the BSP said.

The regulator clarified that only loans in current status and not past due are covered by the relief measure.

The law also does not apply to interbank loan and bank borrowings.

The BSP said parties could mutually agree to a grace period longer than 60 days mandated by the law.

During the period, the BSP said covered institutions should not charge or apply the foregone interest on interests, penalties, fees and other charges to future payments or amortizations of the borrowers after the grace period.

Likewise, institutions are prohibited from requiring their clients to waive the application of the mandatory 60-day grace period, but borrowers may opt not to avail of the said relief and pay their obligations as they fall due.

The BSP said the principal and accrued interest for the 60-day grace period may be paid by the borrower on a staggered basis until the end of the year or as agreed upon by the parties.

In exchange, the BSP is extending relief measures to banks and non-bank financial institutions that agree to further loan term extension or restructurings under the law.