Specifically, the Core Principles state that, to prevent abuses arising from connected lending, banking supervisors should require that any loans banks make to related companies and individuals be on an arm’s-length basis; that such extensions of credit be effectively monitored; and that other appropriate steps are taken to control or mitigate the risks.
Each qualified financial institution can borrow a maximum amount of 90% of its affected existing portfolio or P 5million, whichever is lower, provided the loan amount does not exceed the bank’s borrowing capacity. The loan is payable in seven years with an interest rate of 9% and post-dated checks as collateral.