"We have relaxed the rules so banks can write-off loans without going to the central bank," BSP Deputy Governor Nestor A. Espenilla Jr. told reporters. While a write-off implicates bringing past debts to zero level, these loans can still be collected.

Espenilla said the procedures were relaxed to allow a bank’s board of directors to make a decision on its own without BSP permission. However, the new policy does not cover loans of directors, officers, stockholders and related interests of a bank or the socalled DOSRI (directors, officers, stockholders and related interests) loans. DOSRI loans would still require approval before written off.

Changes to the write-off rules also include microfinance loans, which no longer requires that the loans are 91 or more days past due. Loans that are past due and determined by the board of directors to have become worthless may be written-off "against allowance for probable losses."

The BSP said existing regulations authorize the board of directors to approve write-offs but banks are required to notify the BSP 25 days prior to the write-off. With the new changes, prior notice as a requirement to write-off is no longer a rule.

Instead, banks are required to file a notice within 30 days after every write-off and submit a sworn statement signed by the bank president or officer of equivalent rank that the write-off did not include transactions with DOSRI and a copy of the board resolution approving the write-off.

Last year the BSP directed the board of directors of banks and non-bank financial institutions to put in place controls for probable losses on loans, other credit accommodations, advances and other assets.

A circular was issued last December to provide guidelines for ensuring these controls when they implement write-offs.