MOST BANKS kept their lending criteria for businesses and households unchanged in the first quarter, according to the Bangko Sentral ng Pilipinas (BSP).

The latest Senior Bank Loan Officers’ Survey conducted from Feb. 28 to April 7 released on Friday showed this marked the 44th successive quarter of broadly unchanged credit standards from respondent banks.

The survey seeks to gauge banks’ lending decisions. The central bank said 37 out of the 65 banks tapped for the study sent their responses. The survey was conducted among universal, commercial and thrift banks.

More than half (66.7%) of the respondent banks said they maintained their lending criteria for loans to businesses during the first three months of the year, lower than the 84.8% seen the fourth quarter of 2019, based on results of the modal approach.

On the other hand, the diffusion index (DI) approach showed there was a net tightening in overall credit criteria, with banks citing stricter regulations, deterioration of borrowers’ profiles. Respondent banks also noted a deterioration in profitability and liquidity, as well as reduced tolerance for risk.

A positive DI result means more banks tightened lending rules compared with those that eased, while a negative DI indicates the opposite.

The net tightening showed in the DI approach was seen in “reduced credit line sizes, stricter collateral requirements and loan agreements, and the increased use of interest rate floors.”

Meanwhile, 69.6% of banks surveyed said they maintained their credit criteria for household loans in the first quarter, lower than the 89.7% in October to December 2019, based on the modal approach.

However, the DI approach indicated banks’ credit standards were more strict for personal loans as lenders factored in an “uncertain economic outlook and reduced tolerance for risk.”

“The overall net tightening of credit standards for loans to households also reflected stricter collateral requirements and loan covenants as well as increased use of interest rate floors by respondent banks for the said type of loan,” the BSP said.

The net tightening in standards applied to all types of consumer loans, including those related to housing, credit card, auto and personal salary loans.

For this quarter, respondent banks said they expect credit standards for businesses to be steady based on the modal approach, while the DI approach indicates expectations of tighter criteria due to “less favorable economic outlook, expected deterioration in borrowers’ profiles as well as in the profitability and liquidity of banks’ portfolios, and lower tolerance for risk.”

Likewise, banks also see unchanged credit standards for those securing personal loans in the second quarter of the year based on the modal approach, according to the central bank. However, DI-based results showed lenders see net tighter credit standards, with banks expecting a dimmer economic outlook and weakening profitability, as well as reduced risk tolerance. — L.W.T. Noble