The Central Bank of the Philippines has amended Section 362 of the Manual of Regulations for Banks to expand which guarantees can qualify as effective credit risk transfer arrangements under the rules on credit exposure limits to a single borrower. In addition to guarantees from already eligible guarantors, covered banks may recognize standby letters of credit, demand guarantees, and counter-guarantees issued between a bank's head office and branches in different jurisdictions, allowing the guaranteed portion of an exposure to take the guarantor's risk weight. Recognition of these intrabank guarantees is subject to a cap. The total credit risk-weighted amount of exposures covered by head office and branch guarantees must not exceed 100 percent of the Philippine bank's outstanding total loan portfolio at the end of the preceding month. That amount must be calculated by applying the risk weight of the guaranteeing head office or branch to covered banking book exposures and or the credit equivalent amount of covered off-balance sheet exposures. The total loan portfolio comprises interbank loans receivable, loans and receivables from reverse repurchase with the central bank and other banks, and other loans and receivables, all gross of allowance for credit losses. The amendments also restate that where an exposure is covered by an eligible credit derivative, the protected portion takes the protection seller's risk weight. The circular takes effect 15 calendar days after publication in the Official Gazette or in a newspaper of general circulation.
Central Bank of the Philippines2026-05-14
Central Bank of the Philippines recognizes certain head office and branch guarantees as credit risk transfer subject to 100 percent loan portfolio cap
The Central Bank of the Philippines has amended Section 362 of the Manual of Regulations for Banks to expand which guarantees qualify as effective credit risk transfer arrangements for single borrower credit exposure limits, including certain intrabank standby letters of credit, demand guarantees, and counter-guarantees between head offices and branches in different jurisdictions. Recognition of these intrabank guarantees is capped at 100 percent of the bank’s outstanding total loan portfolio, with risk-weighted amounts calculated using the guarantor’s risk weight for covered exposures, and the rules reiterate that eligible credit derivatives transfer the protected portion to the protection seller’s risk weight.