BSP Clarifies Exclusions From Real Estate Loan Limit And Stress Test

On 28 April 2023, the Bangko Sentral ng Pilipinas ("BSP") issued Memorandum No. M-2022-039 and clarified the definition of infrastructure projects for public use as indicated in Section 363-A of the Manual of Regulations for Banks ("MORB") on Limits on Real Estate Exposures of Universal and Commercial Banks.

1. What are the Real Estate Loan Limit and the Real Estate Stress Test?

Under Section 363-A(a) of the BSP's Manual of Regulations for Banks (the "MORB"), the "real estate loans" of a universal bank or commercial bank must not exceed twenty-five percent (25%) of its total loan portfolio, net of interbank loans.

Under Section 363-A(b) of the MORB, the "real estate exposure" of a universal bank or commercial bank must not exceed certain percentages of its capital. Currently, the thresholds are six percent (6%) of a universal bank or commercial bank's Common Equity Tier I capital ratio and ten percent (10%) of its risk-based capital adequacy ratio, on a solo