Credit standards remain steady – BSP survey
Banks’ lending standards have not changed over the comparable period as loan demand and market conditions remain steady, a survey from the Bangko Sentral ng Pilipinas (BSP) said.
The latest Senior Bank Loan Officers’ Survey (SLOS) covered the second quarter and based on the two approaches used by the BSP, banks’ lending benchmarks were unchanged, even reporting “easier credit standards” versus an equal number that said standards were tightened.
“(There’s) no change from the second quarter and lending standards, more or less, have remained constant unlike in the previous quarter where there was tightening,” BSP Governor Amando M. Tetangco Jr. said yesterday.
Tetangco also noted that credit standards have stabilized due to market conditions. “It depends on market conditions. Earlier (previous quarters) they tigthened somewhat (and they think) it’s sufficient given prevailing market at the time.”
“This would indicate stability and that there is no aggressive behavior,” he added. “There’s no withdrawal or tightening of lending standards so it’s basically steady.”
The SLOS, which the BSP uses to monitor banks’ lending behavior as an “important indicator of the strength of credit activity” said 93.5 percent of banks said their standards for loans to enterprises were unchanged during the period.
“(Banks) attributed their unchanged credit standards to their steady outlook on the domestic economy as well as specific industries, such as wholesale and retail trade, manufacturing, and utilities, among others, as well as banks’ unchanged tolerance for risk,” said the BSP report. In terms of specific credit standards, the unchanged overall credit standards for enterprises were reflected in unchanged collateral requirements and steady use of interest rate floors, it add.
As for lending to households, the survey showed that 81 percent also reported unchanged overall credit standards for loans. “(Banks’) tolerance for risk as well as the unchanged profile of borrowers contributed to the unchanged credit standards for household loans in the second quarter,” said the BSP.
The banks also said that they have maintained loan margins, loan covenants, and loan maturities. They also kept the same interest rate floors for loans to households.
It is the same with commercial real estate loans as 86.4 percent of banks surveyed said they have not tweaked lending standards for this sector.
Still, the BSP commented on a net tightening of overall credit standards for 12 quarters in a row for real estate loans. This was due to a “perceived” stricter oversight of banks’ real estate exposure along with banks’ reduced tolerance for risk, said the BSP.
There were also stricter collateral requirements and loan covenants along with wider loan margins, shorter loan maturities, and increased use of interest rate floors for commercial real estate loans, the BSP explained.