MORNBFI Vol. 1 - Planters Development Bank

§ 4301Q08.12.31PART THREELOANS, INVESTMENTS AND SPECIAL CREDITSSection 4301Q Management of RiskAssets/Minimum Guidelines on LendingOperations. It shall be the responsibilityof the board of directors of a QB to formulatewritten policies on the extension of creditand risk diversification and to set theguidelines for evaluation of risk assets.Well-defined lending policies and soundlending practices are essential if a QB is toperform its credit-extension functioneffectively and minimize the risk inherentin any extension of credit. The responsibilityshould be approached in a way that willprovide assurance to the public, thestockholders and supervisory authorities thattimely and adequate action will be taken tomaintain the quality of the loan portfolio andother risk assets.a. Requirement of lending policiesQBs shall have well-defined lending policieswhich shall ensure that lending shall beupon terms which are in the best interest ofthe institution and in accordance withexisting policy, rules and regulations of theMonetary Board. Such policies shall be inwriting to form part of the institution’spermanent records and shall be madeavailable for inspection by the BangkoSentral.b. Lending operations, definitionLending operations refer to any creditaccommodation and purchase ofreceivables and commercial papers,including purchase of commercial papersin the secondary market.c. Creditworthiness of borrowersBefore extending credit in any form, theQB must exercise proper caution toascertain that the debtors, co-makers,endorsers, sureties and/or guarantors arecapable of fulfilling their commitments.For this purpose, credit investigations mustbe conducted and appropriate statements ofassets and liabilities and of income andexpenditures shall be required of creditapplicants.d. Amounts, purpose and terms ofcredit accommodations. Loans/creditaccommodations shall be granted only inamounts and for periods necessary for thecompletion of the operations to be financed,and for purposes which are attuned togovernment economic policies. Theamount and period of the loan shall bejustified by the financial statementssubmitted or by specific feasibility/projectstudies for a particular operation to befinanced by the loan applied for.e. Documentation of loans. All loans/credit extensions shall be supported byevidences of indebtedness and/or loanagreements which shall contain, amongother things, a statement of the purpose ofthe loan and a program of repayment ofthe obligation.f. Credit files. Adequate credit files ofborrowers shall be maintained which shallcontain documents such as creditinvestigation reports, balance sheets,statements of assets and liabilities, incomeand expense statements, income taxreturns, bank and trade checkings, and otherdocuments/papers showing informationwhich form the bases for the creditextension.g. Periodic review. A periodic reviewof the loan portfolio and the credit standingof borrowers shall be made.h. Arm’s length transactions. A QBshall not relend to or purchasereceivables or other obligations of othercorporations, majority of the voting stockManual of Regulations for Non-Bank Financial InstitutionsQ RegulationsPart III - Page 1