Fitch says BSP regulatory stance becoming more funding-friendly
Fitch Ratings said the Bangko Sentral ng Pilipinas (BSP) is adopting more regulations designed to free up bank resources for both government and private sector’s development projects particularly infrastructure.
In its updated APAC (Asia Pacific) Banks Regulatory Compendium (July 2018) report, Fitch said the BSP’s recent regulatory issues and other upcoming rules indicate further easing of provisions to expand the resources base of the expanding economy.
“We view some of the BSP’s recent moves as efforts to ease the provision of credit to support the government’s infrastructure plans. For instance, entities undertaking such priority projects were allowed a separate single-borrower limit of 25 percent of bank capital in April 2018,” noted Fitch. “This follows an earlier extra limit for public/private partnership projects – also 25 percent of capital – which expired in late 2016".
The BSP has also expanded the list of eligible collateral for its short-term rediscount liquidity facility to include syndicated loans, among other items, Fitch added. “This should help banks to bridge any short-term liquidity needs when extending such credit.”
In its latest review, it said however that monetary policy and the rules on countercyclical buffer are two key issues they are closely keeping an eye on.
Fitch said the BSP’s reduction of the reserve requirement ratio from 20 percent to 18 percent this year is proof that the central bank wants a more market-based liquidity-management tools. That the BSP hiked interest rates by 50 basis points “amid ongoing inflationary pressure” is another move towards these efforts.
Across the region, Fitch remarked that regulators would likely “keep a tight stance on areas where risk concentrations are developing.”
It said that macroprudential rules that are more focused on property and supply of credit “have the potential to affect the operating environment and banks’ credit profiles more than Basel standards.”
“Fitch expects that financial stability regulators will continue to make frequent use of these tools – disclosed or undisclosed – to stem imbalances as and when they build up in the banking systems.” In its assessment of macroprudential regulation, it listed the Philippines as among countries with foreign exhange mismatches.
Earlier this year, BSP Governor Nestor A. Espenilla Jr. said they are preparing a new capital buffer test for banks as part of its pre-emptive monitoring to prevent systemic collapse such as the debt-to-earnings borrowers test.
It is a macro-prudential measure to catch any potential build-up of systemic risks. The BSP has an ongoing consultation with banks on the countercyclical capital buffer, the debt-to-earnings borrowers test and the borrowers interconnectedness index.