Standards for real estate loans unchanged

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Bank’s overall credit standards for commercial real estate loans remains unchanged in the second quarter of the year, a survey from the Bangko Sentral ng Pilipinas (BSP) showed.

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According to the results of the Second Quarter 2013 Senior Bank Loan Officers’ Survey (SLOS), banks reporting tighter overall credit standards for commercial real estate loans outnumbered those indicating the opposite for the fourth consecutive quarter in the second quarter 2013.

“The net tightening of overall credit standards for commercial real estate loans was attributed by respondent banks to stricter oversight of banks’ real estate exposure along with banks’ reduced tolerance for risk,” it stated.

Banks reported wider loan margins and reduced credit line sizes for commercial real estate loans.

The survey added that collateral requirements, loan covenants, loan maturities and use of interest rate floors, as well as steady loan-to-value ratios were also unchanged during the quarter.

“Demand for commercial real estate loans was also unchanged in the second quarter 2013, but a number of banks indicated increased demand for the said type of loans given clients’ improved economic outlook, increased inventory financing needs, banks’ more attractive financing terms and lower interest rates,” it stated.

For the third quarter, most of the respondent banks are expected to maintain their credit standards for commercial real estate loans.

However, banks that expected a tightening of their credit standards outnumbered those expecting the opposite.

“In terms of demand for this type of loan, although most of the respondent banks foresee generally steady loan demand, a number of banks expect demand for commercial real estate loan to continue to increase in the next quarter,” it added.

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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