Banks tighten lending standards in third quarter as risk tolerance falls: BSP survey


Posted at Oct 21 2021 09:39 PM

MANILA - The Bangko Sentral ng Pilipinas said banks became stricter about lending money to businesses and consumers in the July to September period, based on its survey of banks’ senior loan officers. 

The BSP said that banks tightened overall credit standards mainly due to a deterioration in the profiles of borrowers and in the profitability of banks’ portfolio, a less favorable economic outlook, and a reduced tolerance for risk, among other factors.

For businesses and households, this meant smaller loanable amounts; stricter collateral requirements and loan contracts. Businesses meanwhile also had to contend with increased use of interest rate floors, the BSP said.

However, some form of easing in lending standards was seen in terms of longer loan maturities, the central bank added. 

Loan demand from businesses slightly increased despite the stricter requirements, but households borrowed less, particularly when it came to credit card loans, auto loans, and personal or salary loans.

Businesses borrowed more due to increased inventory financing needs of clients and accounts receivable as well as the improvement in customers’ economic outlook, the BSP said. 

Consumer loan demand meanwhile fell due to lower household consumption, banks' less attractive financing terms, and higher interest rates.

The BSP has kept interest rates at record lows for nearly a year now to entice businesses and consumers to borrow and spend more to support the economy. 

The central bank also reduced the amount of money banks are required to hold in reserve to entice banks to increase lending. 

Despite this, banks were still less willing to lend as bad loans piled up amid the disruptions caused by the COVID-19 pandemic. 

However, the banking system remains stable despite the ongoing COVID-19 pandemic as total assets grew, the BSP has said.



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