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Banks (Finance)

BSP Aims to Restrict LGU Borrowings from State-Controlled Banks

Strategic Insights

— 1 min read

The Bangko Sentral ng Pilipinas (BSP) is reviewing its jurisdiction to limit the borrowings of local government units (LGUs) from government banks, including the Land Bank of the Philippines and the Development Bank of the Philippines. The Monetary Board has instructed a review of the BSP's jurisdiction, with the goal of restricting LGU loans from these state-controlled banks. As part of this effort, the BSP is assessing the total investments of all banks in debt securities issued by LGUs, not just those of state-controlled banks. In 2009, government and private banks invested a total of P1 billion in LGU debt securities.

Key Takeaways:

  • The BSP aims to restrict the borrowings of LGUs from government banks, including Land Bank of the Philippines and Development Bank of the Philippines.
  • The Monetary Board has instructed a review of the BSP's jurisdiction, with the goal of limiting LGU loans from state-controlled banks.
  • In 2009, government and private banks invested a total of P1 billion in LGU debt securities, with big banks accounting for 96% (P963 million) of the total investments.
  • The largest bank investment in LGU bonds was P340 million, held by Philippine Veterans Bank, while the second-largest was P194.5 million, held by Philippine National Bank.
  • Other banks with significant investments in LGU bonds included United Coconut Planters Bank, Rizal Commercial Bank Corp., and Maybank.
  • The Local Government Code of 1991 authorized LGUs to issue bonds as an alternative means of raising funds for local projects.

Statistics:

  • Total investments in LGU debt securities by government and private banks in 2009: P1 billion.
  • Amount invested by big banks (96%): P963 million.
  • Largest bank investment in LGU bonds: PHP 340 million (Philippine Veterans Bank).
  • Second-largest bank investment in LGU bonds: PHP 194.5 million (Philippine National Bank).

Sources:

  • Bangko Sentral ng Pilipinas (BSP)
  • Local Government Code of 1991 (Republic Act No. 7160)

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