• Banks maintain lending standards


    Banks have maintained their lending standards for loans to enterprises and households in the fourth quarter of the year, a Bangko Sentral ng Pilipinas (BSP) survey showed on Friday.

    Based on the modal approach, results of the Fourth Quarter 2013 Senior Bank Loan Officers’ Survey (SLOS) showed that most banks or 87 percent of respondents indicated that credit standards to enterprises were kept steady during the quarter.

    The BSP attributed the banks’ unchanged credit standards on its steady outlook on the domestic economy as well as industries such as manufacturing and real estate; unchanged tolerance for risk; and unchanged view of the borrowers’ profile.

    The central bank explained that in the modal approach, the results of the survey are analyzed by looking at the option with the highest share of respondents.

    The survey said that in terms of borrower firm size, which was based on the diffusion index (DI) approach, credit standards for top corporations were unchanged, while standards for large middle-market enterprises, small and medium enterprises, and micro enterprises continued to show a net tightening.

    In the DI approach, a positive DI for credit standards indicates that the proportion of banks that have tightened their credit standards are greater compared to those that eased (“net tightening”), whereas a negative DI for credit standards indicates that more banks have eased their credit standards compared to those that tightened (“net easing”).

    Furthermore, the SLOS said that in the modal approach, most of the respondent banks or 85.7 percent continued to report unchanged credit standards for loans extended to households.

    The DI approach, however, indicated a net tightening of credit standards for households, on the back of perceived stricter financial system regulations and reduced tolerance for risk of banks.

    “In particular, banks’ responses indicated overall stricter collateral requirements for loans extended to households along with unchanged maturity period for loans on the whole,” it stated.

    Q1 2014 outlook
    For the next quarter, the SLOS said that most of the respondent banks still expect credit standards for loans to enterprises and to households to remain unchanged.

    On the other hand, in terms of loan demand, majority of the respondent banks continue to see unchanged overall demand for loans from both enterprises and households.

    Using the DI approach, however, a net increase in overall demand for loans from both enterprises and households was observed.

    For loans to businesses, the net increase in loan demand was attributed by banks to higher inventory financing and working capital needs of borrower firms, as well as an improved economic outlook.

    Meanwhile, the net increase in demand for household loans was from lower interest rates and more attractive financing terms offered by banks.

    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 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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