BSP’s New Rules on Interest Rates Promote Transparency

The new rules by the Bangko Sentral ng Pilipinas (BSP) (Circular No. 730, Series of 2011) that seek to promote transparency in loan prices by requiring all banks to charge interest based on the outstanding balance of a loan at the beginning of an interest period, and to quote the effective interest rates of loan products in their loan documents and marketing materials. The new rules will take into effect on 1 July 2012.

According to BSP, loan pricing transparency will protect consumers, promote healthy competition, and enable smooth and orderly functions of the entire financial system. This new policy will be applied to all institutions that offer credit in the Philippines including credit NGOs, credit cooperatives, lending investors, pawnshops, as well as banks.

To allow banks and other microfinance institutions to better understand their effective interest rates, MicroFinance Transparency has launched Transparent Pricing Initiative for the Philippines.  The aim …