MORNBFI Vol. 1 - Planters Development Bank

§§ 4302Q - 4303Q11.12.31Sec. 4302Q Loan Portfolio and Other RiskAssets Review System. To ensure that timelyand adequate management action is takento maintain the quality of the loan portfolioand other risk assets and that adequate lossreserves are set up and maintained at a levelsufficient to absorb the loss inherent in theloan portfolio and other risk assets, QBsshall establish a system of identifying andmonitoring existing or potential problemloans and other risk assets and of evaluatingcredit policies vis-a-vis prevailingcircumstances and emerging portfoliotrends. Management must also recognize thatloss reserve is a stabilizing factor and thatfailure to account appropriately for lossesor make adequate provisions for estimatedfuture losses may result in misrepresentationof the QB’s financial condition.The system of identifying and monitoringproblem loans and other risk assets andsetting up of allowance for probable lossesshall include, but is not limited to, theguidelines in Appendix Q-10.(As amended by Circular Nos. 622 dated 16 September 2008and 520 dated 20 March 2006)§ 4302Q.1 Provisions for losses;booking. The board of directors of QBs areresponsible for ensuring that theirinstitutions have controls in place todetermine the allowance for probable losseson loans, other credit accommodations,advances and other assets consistent withthe institutions’ stated policies andprocedures, generally accepted accountingprinciples (GAAP), the BSP rules andregulations and the safe and sound bankingpractices. The board of directors, in fulfillingthis responsibility, shall requiremanagement to develop and maintain anappropriate, systematic and uniformlyapplied process consistent and incompliance with existing BSP rules andregulations to determine the amount ofreserves for bad debts or doubtful accountsor other contingencies.The specific allowance for probablelosses for classified loans and other riskassets and the general loan loss provisionas required in Appendix Q-10 shall be setup immediately.§ 4302Q.2 Sanctions. Non-compliancewith the requirement to book the valuationreserves required under the precedingSubsection shall be a ground for theimposition of any or all of the followingsanctions:a. Denial of requests for authority toestablish branches/offices; andb. Fine of P5,000 a day, counted asfollows:(1) from the date the QB was informedthat the recommendation of the appropriatedepartment of the SES was confirmed by theMonetary Board up to the date that saidrecommended valuation reserves wereactually booked, in case of the allowancefor probable losses for loans and other riskassets classified as Substandard(Unsecured), Doubtful and Loss as requiredby the BSP; and(2) from the dates prescribed under thepreceding Subsection up to the date of theactual booking in cases of the two percent(2%) general provision for probable loanlosses, the twenty-five percent (25%)allowance for probable losses on securedloans classified as Substandard, and the fivepercent (5%) allowance for probable losseson Loans Especially Mentioned.A. LOANS IN GENERALSec. 4303Q (2008 - 4306Q) Loan Limit toa Single Borrower. The total liabilities ofany person, company, corporation or firm,to a QB for money borrowed, excluding (a)loans secured by obligations of the BSPor of the Philippine Government; (b) loansfully guaranteed by the government as toQ RegulationsPart III - Page 4Manual of Regulations for Non-Bank Financial Institutions