Lower capital charge eyed for green home lending
The Bangko Sentral ng Pilipinas (BSP) plans to make it more appealing for banks to fund climate-resilient housing by lowering the cost of holding such loans, part of a broader push to advance the country’s climate and development goals.
The central bank is now asking the banking industry to weigh in on a draft circular that would assign a 20 percent credit risk weight to sustainable housing loans, with comments due by April 17.
The proposed treatment would be more favorable than the current 50 percent risk weight applied to home loans fully secured by a first mortgage on a residential property occupied, or to be occupied, by the borrower.
In turn, a lower risk weight would allow banks to set aside less capital to back up these loans—making it cheaper for lenders to finance sustainable housing projects.
Despite the country’s high vulnerability to climate shocks, the BSP said the domestic market for sustainable housing loans remained nascent, with only a limited number of banks offering dedicated green home financing—mostly tied to renewable energy components such as solar panel installations. The central bank said this underscores the need for targeted regulatory measures to spur market development and better align bank lending with national climate priorities.
The proposal also lays out a formal definition of sustainable housing loans and sets eligibility criteria, providing clearer regulatory guidance for banks designing such products.
