MANILA, Philippines – A survey by the Bangko Sentral ng Pilipinas showed that banks had implemented stricter standards for lending to businesses in the 1st quarter of 2016 although standards to house holds standards continued unclipped.
The central bank’s latest Senior Loan Officers Survey, released on Friday, April 22, showed a net tightening of overall credit standards for loans extended to business in the first 3 months of 2016 using the diffusion index or DI approach.
This means that the proportion of respondent banks that had tightened their credit standards were greater compared to those that eased up on their credit standards.
“The net tightening of overall credit standards was attributed by respondent banks to their reduced tolerance for risk, perception of stricter financial system regulations, and a more uncertain outlook on certain industries and firms,” said Jeny Tabin, bank officer at the BSP’s Department of Economic Research.
The bank’s tighter credit standards were shown through increased collateral requirements and loan covenants, she added.
Despite this, the survey showed that most respondent banks foresee a gradual easing of standards for business loans over the next quarter.
“Respondent banks cited expectations of improvement in the profitability of banks’ portfolio and more aggressive competition from banks and non-bank lenders as among the reasons for the expected net easing of credit standards,” she said.
Standards for household lending unchanged
On the other hand, overall credit standards for loans extended to households were unchanged.
This was attributed to the banks’ unchanged tolerance for risk and profile of borrowers which led them to maintain collateral requirements and loan covenants, particularly for auto loans as well as personal and salary loans.
Tabin said that banks anticipate overall credit standards to also ease on the expectation of higher risk tolerance, improvement in borrowers’ profiles, as well as more aggressive competition.
Standards mostly unchanged
The net tightening observed is slight, however. Using the modal approach, which analyzes the survey by choosing the option with the highest share of responses, 86.7% of bank respondents indicated unchanged credit standards.
Similarly, 81% reported unchanged standards for loans extended to households.
Tabin pointed out that this marks the 28th consecutive quarter since Q2 of 2009 that the majority banks reported broadly unchanged credit standards.
The survey also showed that net loans to businesses increased for all but micro enterprises. Net lending to households also increased, save for credit cards and auto loans.
The BSP has been conducting the survey since 2009 to get better view of banks’ lending behavior as it is an important indicator of the strength of credit activity in the country.
For this latest survey, 32 banks responded representing a response rate of 91.4% among all the country’s commercial banks.
The BSP’s latest lending data as of the end of February 2016 shows that bank lending grew at 16.9% to P5.11 trillion. – Rappler.com