Philippines nudges green mortgages

The Bangko Sentral ng Pilipinas wants banks to hold less capital against qualifying green home loans, a move that would make those mortgages cheaper to carry. (business.inquirer.net) In a draft circular released on April 13, the central bank proposed cutting the credit-risk weight on sustainable housing loans to 20 percent from 50 percent for standard owner-occupied mortgages secured by a first lien. Banks can send comments on the proposal through April 17. (philstar.com) A lower risk weight changes how much capital a bank must set aside for a loan, so the proposal gives lenders a direct balance-sheet incentive to write more of these mortgages. The draft applies to residential loans used to buy, build or renovate a home, including solar-panel installation, if the property meets the central bank’s sustainability tests. (business.inquirer.net) (philstar.com) The central bank tied the proposal to the Philippines’ exposure to flooding, typhoons and extreme heat, which it said are putting households and residential assets at rising physical risk. It said the local market for sustainable housing loans is still “nascent,” with only a limited number of banks offering dedicated products. (mb.com.ph) (business.inquirer.net) To qualify, the home must be occupied by the borrower and secured by a first mortgage, and it must meet at least one sustainability criterion. The draft points to features such as flood protection, reinforced structures, lower energy use, on-site renewable energy and water-saving measures. (philstar.com) (mb.com.ph) The proposal fits into a wider sustainable-finance push by the Bangko Sentral ng Pilipinas, which has also floated extra single-borrower-limit room and a zero reserve requirement on certain sustainable bonds. On its regulations page, the central bank says it is publishing policy exposure drafts for stakeholder comment before final rules are issued. (bsp.gov.ph 1) (bsp.gov.ph 2) The climate policy backdrop is also explicit. The Philippines’ nationally determined contribution, filed under the Paris Agreement, targets a 75 percent reduction and avoidance of greenhouse-gas emissions for 2020 to 2030, with 2.71 percent unconditional and 72.29 percent conditional on outside support. (climate.gov.ph) (unfccc.int) If the draft is adopted after consultation, Philippine banks would get a clearer rulebook for what counts as a sustainable housing loan and a stronger regulatory reason to offer more of them. (business.inquirer.net)