BSP chief discounts slower loan growth

MANILA – Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno has countered projections for possible rise of nonperforming loans (NPLs) and a slower loan growth for domestic banks this 2020 due to the impact of the coronavirus disease 2019 (COVID-19).

Diokno said this outlook is “unfounded” since Philippine banks are “adequately

capitalized”.

He said domestic banks have capital adequacy ratios (CAR) that are higher than the 10 percent requirement of the BSP, and the eight-percent requirement set by the Bank for International Settlements (BIS).

“But in recognition of potentially crippling impact of certain events like COVID-19, African swine flu and other unforeseen calamities, BSP has made available a grant of regulatory relief to some concerned banks and quasibanks (QBs),” he added.

These regulatory aids include the “staggered booking of allowance for credit losses, non-imposition of penalties on legal reserve deficiencies, and non-recognition of certain defaulted accounts as past due”.

On Monday, S&P Global Ratings raised the possibility of low expansion of bank loans and increase in NPLs among Philippine banks due to projections of slower trade and private investments on account of the epidemic that started in Wuhan, China since last December.

“We believe banks will be resilient to these external pressures supported by strong fundamentals,” the debt rater said in a statement.

It forecast credit growth of 8-10 percent this year, lower than the 10-12 percent forecast previously.

Last year, the country registered a single-digit credit growth for the first time in several years after it posted an 8.8-percent credit expansion compared to the previous year’s 15 percent.

“In our view, the impact of COVID-19 could drag on demand for corporate loans –which make up 82 percent of banking system’s loans– and stifle momentum in the retail segment,” it said.

The debt rater has cut its growth outlook for the Philippine economy this year to 5.8 percent from 6.2 percent previously because of the impact of the virus, which has affected numerous countries.

It, however, said the reduction is lower than those of other Asia Pacific countries that have more exposure to people and supply-chain flows from China.

As of 6 p.m. on Monday, the Philippine government reported the rise of COVID-19 cases to 20, with at least five said to have no history of travel to COVID-19-affected countries.

Health officials said they are now doing contact tracing of COVID-19 cases, and are maximizing all measures to address the situation.