BANKS credit rules for enterprises and household loans remain broadly unchanged during the second quarter of 2015 as the number of respondent banks reported that they have tighter credit standards, equal to those who said otherwise.
According to the Second Quarter 2015 Senior Bank Loan Officers Survey (SLOS) conducted by the Bangko Sentral ng Pilipinas (BSP), credit standards–as measured by the diffusion index (DI) approach–pointed to basically unchanged overall credit rules for both enterprises and households.
“[T]he number of respondent banks reporting tighter credit standards equaled the number of respondent banks reporting easier credit standards,” it said.
The survey measurements were based on the DI approach. A positive DI for credit standards indicates that the proportion of banks that have tightened their credit standards is greater than those that eased (“net tightening”), whereas a negative DI indicates that more banks have eased their credit standards than those that tightened (“net easing”).
The survey said respondent banks attributed their unchanged credit standards for enterprises to their steady outlook on the domestic economy as well as specific industries, such as wholesale and retail trade, manufacturing, and utilities, among others, as well as banks’ unchanged tolerance for risk.
“In terms of specific credit standards, the unchanged overall credit standards for enterprises were reflected in unchanged collateral requirements and steady use of interest rate floors,” it said.
In terms of household lending, the survey said respondent banks’ unchanged tolerance for risk as well the unchanged profile of borrowers contributed to the unchanged credit standards for household loans during the quarter.
“In particular, banks’ responses indicated unchanged loan margins, loan covenants, and loan maturities along with steady use of interest rate floors for loans to households,” it said.
The BSP stressed that it conducts the SLOS to enhance its understanding of banks’ lending behavior, which is an important indicator of the strength of credit activity in the country.
The survey also helps the BSP 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 monetary policy.