Phl banks sound — IMF

MANILA, Philippines - The International Monetary Fund (IMF) said the Philippine banking sector remains sound amid the reforms introduced by the Bangko Sentral ng Pilipinas (BSP).

Luis Breuer, head of the IMF staff team that visited Manila for the Article IV Mission, said financial sector indicators suggest the banking sector is sound despite faster credit growth.

He pointed out the BSP continues to adopt reforms ahead of the Basel III requirements and also cited the decision of the regulator to lift the additional single borrowers’ limit (SBL) for public private partnership projects.

“Strengthened micro-prudential supervision including the early introduction of Basel III and allowing the additional single borrower limit on PPPs to lapse is to be commended,” he said.

Last December, the central bank lifted the additional 25 percent cap on lending for single borrowers undertaking major infrastructure projects due to the presence of sufficient funding alternatives for PPP project proponents.

Latest data showed liquidity in the financial system expanded faster at 13.2 percent in June from 11.3 percent in May while credit growth accelerated to 19 percent from 18.7 percent.

He pointed out the combination of rapid credit growth, buoyant private investment and fiscal expansion could lead to overheating.

“Nevertheless, macroprudential policies should address systemic risks to financial stability such as rising leverage in some parts of the corporate sector, and build on the results of the real estate stress tests and enhanced monitoring of exposures,” Breuer said.

Earnings of Philippine banks inched up 3.3 percent to P81.8 billion in the first half of the year from P79.19 billion in the same period last year as gains from foreign exchange transactions cushioned the sharp drop in trading income.

Likewise, the banking industry’s assets continued to book a double-digit growth of 13.2 percent to P14.56 billion in end-June from P12.64 billion in end-June last year.

The multilateral lender said there is a need to amend Republic Act 7653 otherwise known as “The New Central Bank Act of 1993” to strengthen the financial stability framework and enhance the monetary transmission.

“In the interim, enhanced coordination and surveillance among the financial sector regulatory bodies should continue to be strengthened particularly to fill in data gaps,” Breuer added.

According to the IMF official, there is also a need to amend the country’s bank secrecy law and anti-money laundering framework to be more in line with international standards.

“This is important to maintain financial integrity and confidence. The anti-money laundering law has been amended to expand the coverage to include casinos,” he said.

President Duterte has signed RA 10927 last July amending the Antil-Money Laundering Act of 2001 by, among others, including casinos, including internet- and ship-based operations, among the covered institutions of the law.