More forex loans taken out in Q3, says BSP

LOANS denominated in foreign currencies extended by local banks rose in the third quarter of the year due to the increase in trading activities, which led to a higher demand for dollars, central bank data showed.

Loans taken out from foreign currency deposit units (FCDU) of banks reached P10 billion at the end of September—2.6 percent higher than the end-June figure of P9.7 billion, the Bangko Sentral ng Pilipinas (BSP) reported.

FCDUs are subsidiaries and affiliates of major banks that deal in foreign currencies, particularly the US dollar and Japanese yen.

“The rising trend in outstanding FCDU loans during the past three quarters may be attributed to ... strong macroeconomic fundamentals,” the BSP said in a statement.

BSP Governor Amando M. Tetangco Jr. said the increase in FCDU loans could have been caused by positive business sentiment and growth in external trade, which led to an increase in demand for dollars from local businessmen doing business with foreigners.

The majority of FCDU loans had maturities of over a year, representing 63.5 percent of the total. Short-term loans accounted for 36.5 percent.

The BSP needs to track the dollar-lending activities of local financial institutions so it can manage the flow of foreign currencies in and out of the country, which influences the value of the peso.

Most of the FCDU loans, or 81.6 percent of the total, went to private Filipino companies. The main beneficiaries were utility firms, merchandise and service exporters, manufacturers, and oil firms.

Meanwhile, the amount of money disbursed by FCDUs increased to $11.6 billion, significantly higher than the previous quarter’s $8 billion. Bulk of the loans released, or 93.9 percent, were short term.

In the quarter that ended in September, deposits in FCDUs increased by $525 million, or 2 percent, to $26.2 billion from that of the pervious quarter, the BSP said. Most of these deposits were held by Filipino bank clients, making up 97.7 percent.

This translated to a loans-todeposits ratio of 38.1 percent, an improvement from the 37.9 percent of the previous quarter.