Financial system stable amid headwinds – BSP

Lawrence Agcaoili - The Philippine Star

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) reported yesterday the country’s financial system remained sound and stable despite the challenging global financial landscape last year.

The central bank said the banking system posted sufficient capitalization, improved asset quality and continued growth in assets, loans and deposit liabilities as it pursued sustained reforms with financial sector stakeholders.

Data showed the net income of banks was relatively stable at P134.6 billion last year from P134.9 billion in 2014 despite tempered trading gains on the back of rising interest rates.

The current capital adequacy ratio (CAR) at 14.9 percent on a solo basis of universal and commercial banks indicates sufficient capitalization. 

The industry’s assets posted a double-digit growth of 12 percent to P12.08 trillion last year from P11.16 trillion in 2014.

With the banking system at its core, the central bank said the financial system continued to provide needed funding to a growing economy.

“Funding remained largely sourced from retail and peso deposits of residents,” it said. 

Meanwhile, foreign currency deposit liabilities comprised 16.7 percent of total deposit liabilities. Banks were generally compliant with the required asset and liquid asset cover ratios of 100 percent and 30 percent, respectively.

The trust industry sustained its growth, growing P8.1 billion to P2.7 trillion last year.  Increasing concentration and faster growth in financial assets, particularly corporate debt securities, over equity investments supported the growth.

Overall, dollar-denominated assets propped up the expansion in trust assets.

Foreign bank branches and subsidiaries (FBB) similarly ended 2015 with improved solvency, asset quality and liquidity.

Profitability was maintained on higher interest income. The four new FBBs brought in fresh funds to the Philippine banking system when they commenced operations in 2015.

Other non-bank financial institutions exhibited prudence in their overall risk-taking activities and provided sufficient capital buffers for unforeseen shocks from their operating environment such as rising interest rates.

In particular, non-bank financial institutions with quasi-banking functions reported positive net profit and sufficient capitalization with borrowings mostly in the form of deposit substitutes.

Notwithstanding the sustained positive performance of the financial system, the BSP continues to bolster the banking system’s capabilities to address potential risks.

“This is in line with the BSP’s objective of promoting greater financial stability,” the BSP said.

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