Banks and non-financial institutions face sanctions for releasing loans and other forms of borrowing to all levels of government without an opinion from the the policy-setting Monetary Board, Bangko Sentral ng Pilipinas said Monday, reiterating the significance of such a consultation.
Opinion of the board is crucial when assessing the impact of loans and other borrowings taken by local government units on prices, monetary aggregates and the balance of payments.
“The process also enables the BSP to monitor the borrowing of the public sector and assess their impact on the monetary sector and external payments position of the economy, in fulfillment of its role and mandate to promote and maintain monetary and financial stability,” the central bank noted in an e-mailed statement.
Republic Act No. 7653 or the New Central Bank Act of 1993 designated the BSP as government’s financial adviser on credit operations, which makes the Monetary Board opinion an official requirement when it comes to borrowings by the all levels of the national government including state-owned and -controlled corporations, local water districts, and colleges and state universities.
Request for an opinion should indicate the amount and purpose of the loan, the lending bank, the terms and conditions of the loan including interest rate, maturity, fees and other charges. — VS, GMA News