The Philippine Monetary Board approved on 21 November 2002 a lower risk weight for banks’ SME and micro-finance loan portfolios that meet prudential standards.
Under the new ruling, which modifies Circular No. 280 dated 29 March 2001, qualified SME and micro-finance loan portfolios are now assigned 75 percent risk weight, from the 100 percent risk weight originally provided under the Circular. The reduction is based on the treatment of SME loans in the proposed New Basel Capital Accord, which banking supervisory authorities are expected to implement worldwide in 2006. The New Basel Capital Accord contemplates a 75 percent risk weight for exposures to SMEs.
