Philippine Daily Inquirer - - BUSINESS - By Daxim L. Lu­cas @daxINQ

Bank­ing reg­u­la­tors on Fri­day moved to re­as­sure the pub­lic about the strength of the fi­nan­cial sys­tem af­ter the bank­ruptcy of a Korean-owned ship­builder in Su­bic Bay trig­gered a $412mil­lion de­fault on lo­cal lenders—the big­gest in Philip­pine cor­po­rate his­tory.

In a state­ment to the In­quirer, the Bangko Sen­tral ng Pilip­inas said the bank­ing in­dus­try has enough cap­i­tal buf­fer to weather the sud­den col­lapse of Han­jin Heavy In­dus­tries and Con­struc­tion Corp. Philip­pines, which op­er­ates a $1.6-bil­lion ship­yard in Zam­bales em­ploy­ing 23,000 work­ers.

No­tably, BSP Deputy Gov­er­nor Diwa Guini­gundo re­frained from com­ment­ing on the fi­nan­cial health of the in­di­vid­ual banks with large loan ex­po­sures to Han­jin, say­ing it would be “pre­ma­ture” for the reg­u­la­tor to com­ment on a mat­ter that is pend­ing in the ju­di­ciary, re­fer­ring to the cor­po­rate re­ha­bil­i­ta­tion pe­ti­tion Han­jin filed on Jan. 8 with the Olon­gapo re­gional trial court.

Guini­gundo as­sured the pub­lic, how­ever, that the com- bined loan amount— worth P21.6 bil­lion at the pre­vail­ing ex­change rate—was “neg­li­gi­ble” based on the cen­tral bank’s “ini­tial as­sess­ment” rel­a­tive to both to­tal loans and to­tal dol­lar loans of the bank­ing sys­tem.

“Our banks as a whole are very strong and more than ad­e­quately cap­i­tal­ized, their as­sets con­tinue to grow and the qual­ity of their loans based on non­per­form­ing loan ra­tio is less than 2 per­cent,” he said in a text mes­sage on Fri­day morn­ing.

As the ship­builder de­faulted on its obli­ga­tions, the con­cerned fi­nan­cial in­sti­tu­tions—Rizal Com­mer­cial Bank­ing Corp., Land Bank of the Philip­pines, Met­ro­pol­i­tan Bank and Trust Co., Bank of the Philip­pine Is­lands and Banco de Oro Uni­ver­sal Bank—de­cided to move to take con­trol of the firm, while agree­ing among them­selves to act col­lec­tively to pre­serve the firm’s as­sets.

“We agreed to work to­gether to pro­tect the in­ter­ests not only of the bank­ing in­dus­try but of the Philip­pine econ­omy, as well, given the large num­ber of peo­ple Han­jin em­ploys in Su­bic,” the pres­i­dent of one of the cred­i­tor banks

said, ex­plain­ing that his peers from other cred­i­tor banks had agreed that “no one will jump the gun” to seize col­lat­eral ahead of other cred­i­tors, an act that would trig­ger a free-forall on Han­jin’s as­sets and jeop­ar­dize the re­ha­bil­i­ta­tion plan that had been filed in the lo­cal courts.

Prior to this week’s de­fault, the lo­cal bank­ing sys­tem held a to­tal of P260 bil­lion in soured loans com­pared to to­tal bank lend­ing of P9.7 tril­lion, for a non­per­form­ing loan ra­tio of 2.67 per­cent in late 2018. In­clud­ing the Han­jin bad loans, the coun­try’s non­per­form­ing loan ra­tio could rise to 2.89 per­cent.

None­the­less, Guini­gundo said that the banks in com­pli­ance with the BSP’s reg­u­la­tions have risk man­age­ment sys­tems in place.

“They are very liq­uid and their profitabil­ity has been sus­tained,” he said. “They can very well han­dle and man­age this spe­cific case.”

In sep­a­rate in­ter­views with the In­quirer, the heads of Han­jin’s cred­i­tor banks said that the pro­vi­sional agree­ment among mem­bers of their loose con­sor­tium might even­tu­ally call for the forced sale of the ship­yard to a strate­gic in­vestor as a way for them to re­cover their losses.

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