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Credit rules tightened in Apr-June – bank poll

BANKS tightened credit standards on loans extended to companies and individual borrowers in the second quarter, the Bangko Sentral ng Pilipinas (BSP) has found.

Results of the Second Quarter 2019 Senior Bank Loan Officers’ Survey (SLOS) indicated a net tightening of overall credit standards for loans to enterprises and households in April to June using the diffusion index (DI) approach.

A positive DI indicates that the proportion of banks that tightened their credit standards is greater than those that did not (net tightening), while a negative DI indicates more banks eased than those that tightened (net easing).


The net tightening of credit standards for business loans during the quarter was attributed by respondent-banks to their perception of stricter financial system regulations and deterioration in the profile of borrowers.

“In terms of specific credit standards, DI-based results pointed to wider loan margins, stricter collateral requirements and loan covenants, as well as increased use of interest rate floors,” the central bank said.

Meanwhile, the net tightening of credit standards for household loans — particularly for housing, auto, and personal or salary loans — reflected stricter collateral requirements and loan covenants, shortened loan maturities, and increased use of interest rate floors.

“Respondent banks attributed the tightening of overall credit standards for household loans, largely to [the] deterioration in the profile of borrowers,” the BSP said.

It also reported a net increase in overall demand for both business and household loans, which was attributed to firms’ higher working capital requirements and higher household consumption, lower interest rates, and banks’ more attractive financing terms.

Over the next quarter, the Bangko Sentral said results of the survey suggested expectations of a net increase in overall loan demand for both business and household loans.

“For business loans, the expected net increase in demand was associated by respondent banks to their corporate clients’ higher working capital requirements, among other factors,” it said.

“Meanwhile, the anticipated net increase in loan demand from households was attributed by respondent-banks largely to expectations of higher household consumption and housing investment,” the BSP added.

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