By Melissa Luz T. Lopez, Senior Reporter

Bank lending standards broadly unchanged

Posted on April 22, 2017

PHILIPPINE BANKS kept their lending criteria largely steady as the year opened, although some lenders said they somewhat grew stricter in granting loans to businesses as they sought to minimize risky exposures, results of a recent central bank survey bared.

The central bank uses the quarterly survey to understand the lending decisions made by banks and monitor bank credit. BW FILE PHOTO
Loan officers of the country’s universal and commercial banks said they maintained the criteria in assessing loan applications filed by both consumers and businesses, according to the results of the Senior Loan Officers’ Survey conducted by the Bangko Sentral ng Pilipinas (BSP).

This marks the 32nd straight quarter when the borrowing standards were kept “broadly unchanged” for both corporate and individual clients, the BSP said in its report.

The central bank uses the quarterly survey to understand the lending decisions made by banks and monitor bank credit. A total of 31 of 35 big banks responded to the poll.

Some 93% of lenders said they used the same standards for granting loans to businesses, higher than the 90% that said so during the fourth quarter of 2016.

Computed under the diffusion index (DI) approach, more banks actually grew stricter in assessing loans for corporate borrowers versus those who said that they loosened rules. The BSP said this was due to expectations of stricter financial system regulations, a less favorable economic outlook, and a reduced risk appetite.

This was reflected in the use of stiffer loan agreements and the increased use of interest rate floors, despite longer loan terms, narrower margins, and steady collateral requirements. An exception was made for micro-firms, which actually enjoyed a net easing in terms of credit criteria, the central bank said.

All big banks reported that they used the same standards in deciding on personal loans, reflecting their bullish outlook for consumer activity.

“The unchanged credit standards were attributed by respondent banks largely to their sustained tolerance for risk, steady profile of borrowers, and a stable economic outlook,” Ruby Anne E. Lemence, bank officer at the BSP’s Department of Economic Research, said in a press briefing on Friday.

Private consumption, which accounts for roughly 70% of the Philippine economy, grew by 6.9% in 2016 to match the overall pace of economic growth, according to data from the Philippine Statistics Authority.

In particular, the lenders did not change its criteria in assessing housing and salary-based loans during the January-March period, although some tightening was observed for car loans and credit card-based transactions.

Overall, the banks also reported stable loan demand from both businesses and households. Some lenders even said that they expect stronger credit demand across all firms, on the back of higher working capital and financing needs. Individual borrowers are also likely to seek more loans as they seek to avail of “more attractive” financing terms offered by the banks, the report added.

About 77.3% of banks also said that they kept borrowing requirements steady for commercial real estate loans during the quarter, but the DI approach showed that some lenders actually grew more stringent as they imposed wider margins.

The banks also expect loan demand for both housing and commercial property to keep rising during the second quarter.