Banks maintain credit standards for enterprises in Q2


Banks have maintained credit standards for loans to enterprises in the second quarter of the year, a survey from the Bangko Sentral ng Pilipinas (BSP) showed.

According to the results of the Second Quarter 2013 Senior Bank Loan Officers’ Survey (SLOS) showed that this is the 17th consecutive quarter starting the second quarter of 2009 that most banks reported broadly unchanged credit standards.

Most banks, or 86.2 percent of banks that responded to the question, indicated that they generally maintained their credit standards for enterprises during the quarter.

“However, a few banks eased their credit standards for enterprises, citing improvements in the profile of borrowers and profitability of banks’ asset portfolio, and an increased deposit base as main factors that contributed to the easing,” it said.

Respondents’ more favorable outlook on the domestic economy and certain industries, more aggressive competition from other banks as well as from non-bank lenders, along with higher tolerance for risk also underpinned some banks’ easing view.

SLOS further showed that some banks reported increased credit line sizes, less strict collateral requirements, longer loan maturities, and reduced use of interest rate floors across all firm sizes, except in the case of micro enterprises.

In terms of borrower firm size, the proportion of respondent banks that reported easing credit standards for top corporations remained low but was higher than those indicating the opposite for the fourth consecutive quarter.

“Said result matches the net easing indicated by responding banks in the previous quarter,” it stated.

Meanwhile, the survey added that overall credit standards for large middle-market enterprises and small and medium enterprises (SMEs) were unchanged after showing a slight net easing in the previous quarter.

However, banks’ responses continued to show a slight net tightening of overall credit standards for micro enterprises for the fourth consecutive quarter.


Standards to remain unchanged

For the next quarter, SLOS said that most of the respondent banks expect credit standards for loans to enterprises to remain unchanged.

“However, the percentage of banks foreseeing a slight easing of credit standards for loans across all firm sizes, except micro enterprises, was higher compared to those expecting otherwise,” it said.

Expectations of improved profitability and liquidity of banks’ asset portfolios, increased deposit base, and more aggressive competition from other banks and from non-bank lenders were cited by said respondent banks as factors behind the potential easing of standards.

The BSP has been conducting the SLOS since 2009 to enhance its understanding of banks’ lending behavior, which is an important indicator of the strength of credit activity in the country.

The SLOS consists of questions on loan officers’ perceptions relating to the overall credit standards of universal/commercial banks in the Philippines, as well as to factors affecting the supply of and demand for loans by both enterprises and households.

The survey also helps the central bank assess the robustness of demand conditions, potential risks in the asset markets, and possible strains in the bank lending channel as a transmission channel of its monetary policy.


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