By Eileen A. Mencias

Banks have urged the Bangko Sentral to scrap the 2-percent loan loss reserve required of them to cover for losses in the event of loan defaults.

Philippine National Bank president Omar Mier said in a forum held at the central bank yesterday that the monetary regulator should scrap the general loan loss reserves to encourage lending.

Mier also asked the central bank to give banks access to its facility, even for those that have already reached the limits set only last month, and allow them to use unaudited financial statements of companies in the processing of loan applications.

?We?d like to eliminate the 2-percent general reserve because it is affecting our pricing and it is impacting on liquidity,? Mier said in the forum.

Central bank data showed that loan loss reserves of banks stood at P88.63 billion at the end of November against total credit portfolio of P2.47 trillion.

Bangko Sentral director Leni Sylvestre said the central bank could revisit the regulation but stressed that the loan loss provisioning had been very helpful to banks.

Mier said funds earmarked for loan loss reserves seemed small but it still reduces a bank?s profitability.

Bangko Sentral Deputy Gov. Diwa Guinigundo, meanwhile, said the central bank could also review the policy that limited a bank?s access to the rediscounting facility to enable smaller banks gain access to the window. The central bank limited the access to the rediscounting facility to the same amount as its single borrowers? limit, or 25 percent of loan portfolio, even as the central bank?s budget for the facility was increased to P60 billion.

Guinigundo said more banks had been tapping the rediscounting facility. Banks as of end-February have tapped P33.6 billion from the rediscounting facility. The central bank raised the amount of funds in the rediscounting facility to P60 billion from P40 billion in February and from P20 billion in November.

Mier said much of the loans rediscounted by PNB at the central bank were mainly government loans and warned that PNB might not be able to provide liquidity to state institutions if their access was limited.

Guinigundo said the bulk of the papers that the central bank had been receiving consisted mainly of papers of the National Food Authority.