MANILA - Philippine banks remain reluctant to lend to businesses and households despite the central bank’s moves to encourage more lending to stimulate the economy, the Bangko Sentral ng Pilipinas (BSP) said on Thursday.

BSP Governor Benjamin Diokno said that while the central bank has cut its policy rate to a record low, and reduced banks’ reserve requirements, “risk aversion among banks persists owing mainly to the unpredictable nature of the pandemic.”

“Banks have continued to adopt stringent lending standards, in part, to avoid a further escalation of nonperforming loans that can threaten their financial sustainability,” Diokno said.

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The BSP’s third quarter survey of senior bank loan officers showed that banks are tightening credit standards--making it harder to borrow money by raising collateral and other requirements.

“This has contributed to a slowdown in bank lending to businesses and households in the most recent quarters.”

The BSP survey showed that 47.7 percent of banks tightened overall credit standards for loans to enterprises during the quarter. For loans to households, close to 50 percent of the respondent banks indicated that they tightened their overall credit standards, the central bank said.

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While businesses have been trying to borrow more, households have been borrowing less from banks, the BSP survey also showed.

“The overall net increase in loan demand from firms was attributed by respondents to a decrease in clients’ internally-generated funds and higher customers’ inventory and capital financing needs, along with lack of other sources of funds. Meanwhile, respondent banks associated their observed decline in consumer loan demand largely to lower household consumption and housing investment,” the BSP said.

Diokno however said monetary authorities are confident that the continued opening of the economy should boost loan demand.

“The gradual easing of restrictions and sustained programs by the government to protect human health and livelihood should help instill confidence among consumers and businesses,” the BSP chief said.

Diokno also said Philippine banks remain strong despite the challenges posed by the pandemic.

“We are confident in the soundness and resilience of the banking sector as capital adequacy ratios have stayed above the prescribed standards.”

- Report from Warren de Guzman, ABS-CBN News