MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) will continue to expand it’s surveillance toolkit as it closely monitors lending activities to prevent economic overheating.
BSP Deputy Governor Diwa Guinigundo, in a speech at The Outlook 2018 organized by Lamudi, said the central bank continues to pursue intensified surveillance of bank lending activity and reinforcement of financial sector regulatory reforms.
He said the BSP has expanded its surveillance toolkit to better monitor risks from potential overheating, among others.
Guinigundo said there is limited evidence of overheating as credit expansion in the country is accompanied by solid demand for loans across key economic sectors and remains within acceptable limits based on the International Monetary Fund (IMF) and Bank for International Settlements (BIS) methods.
He added domestic credit-to-gross domestic product (GDP) ratio remains one of the lowest in the region, while the trend in the property sector remains broadly aligned with its fundamental values.
“We believe there’s no sign of price bubbles in asset market and no sign of overheating in macroeconomy,” he said.
He cited some macroprudential measures including he cap on loan-to-value ratios, cap on bank’s real estate loans, real estate stress test limit, expanded reporting of banks’ real estate exposures, among others.
“The Philippine economy is set to sustain its lead and beat the heat,” he said.
Guinigundo added the strong and resilient macroeconomic fundamentals provide a solid foundation for sustainable development of the real estate industry.
He said favorable business and investment climate provides plentiful opportunities for domestic and foreign investors, while accelerated infrastructure development would increase absorptive capacity and growth potential.
The country’s banking system remains sound and stable enabling the efficient intermediation of funds into the expanding economy as evidenced by solid asset growth, improved quality of loan portfolio, and sustained profitability.
Guinigundo said total resources of the banking industry stood at P15.7 trillion as of end-June with deposits reaching P12.15 trillion, while earnings of Philippine banks amounted to P172.8 billion translating to a return on equity of 9.5 percent.
On the other hand, the industry’s loan book reached P9.35 trillion as of end-June, but its non-performing loan (NPL) ratio was steady at 1.9 percent.
Furthermore, Guinigundo added the capital adequacy ratio (CAR) of big banks stood at 15.8 percent on a consolidated basis and 15.2 percent on a solo basis, well above the BSP threshold of 10 percent and Basel’s eight percent.