2016 tests bank resiliency anew – BSP

MANILA, Philippines – The Bangko Sentral ng Pilipinas (BSP) believes the resilience of Philippine banks would be tested anew this year amid the volatile global financial markets brought about by the interest rate liftoff in the US and the economic slowdown in China.

BSP Governor Amando Tetangco Jr. said in his speech during the annual reception for the banking community Tuesday night that the country’s sound, stable, and liquid banks would continue to be a major source of funding for the productive sector.

“While 2016 will test the resilience of our banking system, we can rely on the quality of our preparations to manage evolving risks from volatility as market tide shifts,” Tetangco said.

He said the Philippine banking sector was a source of strength and stability for the economy last year.

He cited the decision of Fitch Ratings to raise the outlook for the Philippine banking sector to positive from stable due to the generally healthy profile of local lenders, sound operating environment and the Philippines’ strong economic fundamentals.

“Fitch Ratings has given the Philippine banking system a positive rating outlook for 2016, the only one for Asia-Pacific,” Tetangco said.

Latest data showed the asset base of Philippine banks stood at P11 trillion, while the industry’s non-performing loans remained low at 2.3 percent as of end-September last year.

“The combined resources of the banking industry are sufficient to finance the requirements of the real economy,” Tetangco said.

Tetangco said, the banking sector more than meets the BSP and international standards amid the continued build-up in their capital base, allowing the industry to survive the global financial turmoil brought about by the interest rate hike by the US Federal Reserve, the slowing inflation in the euro zone and Japan as well as the economic slowdown in China.

“In fact, our semestral stress tests confirm further that bank capitalization stands resilient, even against extreme tail events. Indeed, the numbers do speak for themselves,” he added.

The country’s gross domestic product (GDP) growth accelerated to six percent in the third quarter from the revised 5.8 percent in the second quarter of last year on the back of robust domestic demand and improving government spending.

On the other hand, inflation eased to a 20-year low of 1.4 percent last year from 4.1 percent in 2014 due to stable food prices and cheaper utility rates amid the continued decline in oil prices.

“Indeed, for our banks, 2015 was a year that tested their resilience but they came out of it stronger and more stable. Now, we start 2016 from a position of strength. This is a good place to start. We have done our homework,” he said.

The BSP chief reiterated that Philippine banks would be able to manage external risks that may arise from continuing volatility and possible contagion and closer to home avoid excessive leverage and imprudent practices