‘Fewer excuses for banks not to lend small biz after Moody’s upgrade’
While I welcome the upgrade of our outlook, we must not deny that it came at the expense of credit growth, which declined recently for the first time in more than a decade.
WITH Moody’s “stable” outlook to the Philippine banking sector, a leader of the House of Representatives on Wednesday said banks will have now “fewer excuses” to lend to small businesses in need.
House Committee on Ways and Means Chairman Rep. Joey Salceda of Albay issued the statement after international credit watcher Moody’s Investors Service have reverted their assigned outlook to the Philippine banking sector back to stable from “negative.”
“We currently have historic levels of liquidity expansion via monetary policy. Much of our policy interventions were around keeping our banks strong—from granting them the highest levels of capitalization ever in the history of our state banks, to allowing banks to dispose of nonperforming assets in tax-advantaged ways through the FIST [Financial Institutions’ Strategic Transfer] Act,” said Salceda.
FIST Act aims to help financial institutions in their bad debt resolution and management of their non-performing assets (NPAS) to cushion the adverse impact of the Covid-19 pandemic on their financial operations.
“While I welcome the upgrade of our outlook, we must not deny that it came at the expense of credit growth, which declined recently for the first time in more than a decade,” Salceda added.
Banks remained strong because they used the P1.9 trillion in liquidity that the BSP released to trade in the markets, instead of lending to struggling businesses, the lawmaker said.
“Now, more than ever, bank-initiated borrower relief is important. Banks should offer ways to make existing debt payable on gentler terms for small businesses. Options for restructuring should be available to borrowers with existing payables. Flexible arrangements should be available to ensure that current debt load does not become non-performing,” he said.
In an outlook note, Moody’s said the main basis of their action reflects their expectations that a “mild economic recovery” will support the operating environment for Philippine banks.
The credit watcher particularly cited sufficient capital buffers, stable profitability and favorable funding conditions as positive support to the Philippine banking system’s outlook.
The ratings agency, however, warned that asset risks remain high because of a “prolonged curtailment” of business activity, high unemployment rate and weak consumer sentiment.
Meanwhile, Salceda said the Corporate Recovery and Tax Incentives for Enterprises Act, which is now in effect, should further strengthen the banking sector, appetite for borrowing, and economic recovery in general.