Bank lending to grow 10-15% this year — Neri

Monetary authorities expect bank lending to grow between 10- to-15 percent this year after contracting in the past few years, Socioeconomic Planning Secretary Romulo Neri said. Neri, a member of the Monetary Board (MB), the central bank’s policy making arm, said the implementation of the tiering system and record-low interest rates on government securities will force banks to lend out their money instead of investing in Treasury Bills (T-bills) or depositing funds at the Bangko Sentral ng Pilipinas (BSP).

"The banks will no longer rely on their "lazy banking" strategy. Bankers would have to earn their money," Neri said. The "lazy banking strategy" refers to investing in government securities and placing money in the BSP.

Tiering is a system in which the BSP pays a lower rate on short-term money placed by banks in excess of certain threshold levels.

In the case of government securities, National Treasurer Omar T. Cruz said the market is on a downward momentum, indicating that rates could drop even lower in the next few auctions. During Monday’s auction, the yield for the benchmark 91-day T-bill fell 3.171 percent from 3.795 percent during the Jan. 8 auction.

With the recent developments, Neri said banks will be forced to start developing new clients. "We have already narrowed the door for Treasury bills. It’s no longer an avenue for them to park their excess funds," he explained.

"I think the combination of the tiering scheme of the central bank and lower rates of Treasury bills will somehow force the banks to lend more and more to private sector types," he added.

He said at present, bank lending is growing at a rate of four-to-five percent. "That barely covered inflation which is about seven percent," he noted. Worse, he said, during the past few years, growth was pegged at three to four percent. This means that in real terms, bank lending has been negative.

"We are hoping to see real positive growth," he said.

Neri said he has already proposed investing in government projects to boost growth in lending. "I am also urging the banks to put money into government infrastructure projects," Neri said. "I gave them a list of the infrastructure projects."

He said Banco De Oro Universal Bank has already helped finance the construction of the Cavite portion of the South Expressway. "I think that one is good," he said.