Bankers urged to keep lending rates reasonable

MANILA, Philippines — The Bankers Association of the Philippines (BAP) is urging banks and other financial institutions to help ease the burden of Filipinos by maintaining reasonable interest rates amid the coronavirus disease 2019 or COVID-19 pandemic.

BAP president Cezar Consing, in a message to bankers said the impact of the month long enhanced community quarantine imposed by Malacañang to prevent further spread of the virus is now becoming more apparent.

“Maintain reasonable lending rates, with the objective of trying to keep such rates as close as possible to pre-enhanced community quarantine levels,” he said.

Consing, who is also president and chief executive officer of Ayala-led Bank of the Philippine Islands (BPI), said the member banks of BAP have taken extraordinary steps to continue to serve bank customers.

“As we move into week three of the enhanced community quarantine, the impact of the crisis on the economy, including our corporate and consumer borrowers, is becoming more apparent,” Consing said.

The BAP president also encouraged banks to contribute to stable and liquid financial markets.

Aside from keeping digital channels open and ensuring the availability of cash in branches and ATMs, Consing said banks should continue to maintain a level of branch presence that allows for the execution of transactions that cannot be performed digitally.

He pointed out that the Bangko Sentral ng Pilipinas (BSP) has reduced both the policy rate and reserve requirements and has taken steps to ease the regulatory burden borne by banks.

Antonio Moncupa, president and chief executive officer of East West Banking Corp., said businesses particularly micro, small and medium enterprises (MSMEs) would surely be affected especially if the enhanced community quarantine is prolonged.

“No sales for an extended period could impair balance sheets and could lead to loss of jobs and eventually they may find it difficult to pay debt. I am pretty sure both the fiscal and monetary authorities are very much aware and will do the necessary intervention to mitigate the effects of the enhanced community quarantine on both households and businesses,” Moncupa said.

The BSP’s Monetary Board has slashed interest rates by 150 basis points since May last year due to benign inflation and slower than expected gross domestic product (GDP) growth, almost reversing a tightening cycle that saw rates jump by 175 basis points in 2018 due to inflation breach.

For this year alone, the central bank has lowered interest rates by 75 basis points, including a deep 50 basis points cut last March 19 to boost market confidence and prevent the potential spillovers of external headwinds including the COVID-19 pandemic.

The monetary policy easing is aimed at mitigating the risk of financial sector volatility in light of unfolding global developments by ensuring adequate domestic liquidity and credit in the financial system as well as lowering borrowing costs for affected firms and households.