10/18/2018 Bangko Sentral ng Pilipinas - Publications & Research

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Media Releases

BSP Fine Tunes Definition of Past Due and Non-Performing Exposures

01.20.2017

The Monetary Board (MB) has approved the amendments to the regulatory definitions of past due and non-performing
exposures, including restructured loans, to align with predominant global conventions and to achieve internal consistency of
classification across all types of loan products regardless of payment schedule. These refined definitions are part of a series
of reforms instituted by the BSP to promote a more responsive and consistent regulatory approach for BSP supervised
financial institutions (BSFI). The revised definitions are likewise intended to complement the BSFIs’ credit risk management
as part of their internal credit rating and classification systems.

Under the new definition, the general rule is that an account that does not pay on contractual due date is deemed past due
the following day. However, BSFIs are allowed to provide for a cure period policy on a credit product-specific basis within
which clients may be allowed to catch up on a late payment without being considered as past due, provided that the cure
period policy is based on actual collection experience and reasonable judgment that support tolerance of occasional payment
delays.

On the other hand, an account or exposure is considered non-performing, even without any missed contractual payments,
when it is deemed impaired under existing applicable accounting standards, classified as doubtful or loss, in litigation, and/or
there is evidence that full repayment of principal and interest is unlikely without foreclosure of collateral, in the case of
secured accounts. All other accounts, even if not considered impaired, shall be considered non-performing if any contractual
principal and/or interest are past due for more than ninety (90) days, or accrued interests for more than 90 days have been
capitalized, refinanced, or delayed by agreement.

Shown below is a comparison of the revised against the existing guidelines based on the mode of payment:

COMPARISON WITH THE OLD POLICY BASED ON THE MODE OF PAYMENT

New Policy Old Policy
Mode of Payment Past Due NPL Past Due NPL
3 installments Installments unpaid for
Monthly Installment
missed more than 90 days
Quaterly/Semestral/ 1 day after due date excluding Past due for more 1 installment
Annual cure period, if any than 90 days missed Past due for more than 30
Not paid at days
At Maturity
maturity
Daily/weekly/semi- Arrears is 10% of
Upon past due
monthly 1 day after contractual due date; 11th day if with O/S balance
Microfinance cure period
1 installment Upon past due
(PAR)

The revised policy also provides a clearer basis for a restructured loan as its definition now includes the purpose for
restructuring, that is to lessen the financial difficulty of the borrower and maximize collection and realizable economic value on
an obligation within a reasonable period of time.

To facilitate transition, BSFIs are given until 31 December 2017 to make the necessary revisions in their management
information and reporting systems relating to their past due and non-performing exposures. Effective 01 January 2018, past
due and non-performing exposures shall be mandatorily reported in accordance with the requirements of the revised policy.

http://www.bsp.gov.ph/printpage.asp?ref=http://www.bsp.gov.ph/publications/media.asp?id=4275&yr=2017 1/2