Banks tighten household credit standards; rules for companies unchanged


Banks maintained their overall credit standards for enterprises but tightened lending rules for household loans during the second quarter, the diffusion index (DI) contained in the Second Quarter 2014 Senior Bank Loan Officers Survey (SLOS) showed.

The number of banks that indicated a tightening for enterprises equaled those that eased their standards, the survey said.

“The overall credit standards were unchanged as banks’ tolerance risk remained steady,” it said.

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

The SLOS also revealed that respondent banks’ outlook on the domestic economy, as well as specific industries, such as real estate, renting and business activities, wholesale and retail trade, manufacturing, financial intermediation, and utilities also remained steady.

In terms of household lending, the DI approach was recorded at 5 percent from a negative 6.9 percent a year earlier, indicating a net tightening of banks’ overall credit standards for household loans.

The BSP survey said that the tightened credit standards for households were due to banks’ reduced tolerance for risk and perception of stricter financial system regulations.

“In particular, banks’ responses indicated stricter collateral requirements for all types of household loans, except credit card loans, and more stringent loan covenants for auto loans and personal/salary loans,” it added.

The BSP explained that it has been conducting the SLOS since the first quarter of 2009 to enhance its understanding of bank’s lending behavior, which is an important indicator of the strength of the credit activity in the country.

Mayvelin U. Caraballo


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