IMF says RP banks remain resilient

MANILA, Philippines - The International Monetary Fund (IMF) said the local banking system remained resilient after the Bangko Sentral ng Pilipinas (BSP) managed to put in place reforms aimed at containing the effects of the global financial crisis.

Il Houng Lee, head of the IMF mission that visited the Philippines last week, said the BSP has significantly enhanced stress testing capacity and has made substantial pro-gress in the banking supervision and regulatory framework.

“Spillovers from the global crisis through financial channels have been well contained,” Lee stressed.

The IMF official pointed out that stress tests showed that the largest banks in the country are resilient to a wide range of macroeconomic credit, market, and liquidity shocks.

“Aided by past reforms, the banking system is well-capitalized, liquid, and asset quality and provisioning are generally high,” he added.

Latest data from the central bank showed that the total assets of the banking system jumped by 8.5 percent to P6 trillion in August from a year-ago level of P5.5 billion mainly due to the expansion of the holdings of debt securities by universal and commercial banks.

The central bank said universal and commercial banks continued to account for almost 90 percent of the total resources of the banking system.

Data showed that bad loans or non-performing loans (NPLs) of banks fell by 3.7 percent to P117.1 billion as of end August from the year-ago level of P121.6 billion while the banks’ total loan portfolio (TLP) inched up by 1.6 percent to P2.793 trillion from P2.749 trillion.

The industry’s NPL ratio of 4.2 percent as of end-August was comparatively lower than Indonesia’s 4.6 percent but higher than Thailand’s 4.2 percent, Malaysia’s 2.1 percent, and South Korea’s 1.5 percent.

Likewise, the banking system’s asset quality continued to improve as the non-performing loan (NPL) ratio eased further to 4.2 percent as of end-August from 4.4 percent a year ago.

Lee, however, said concentration risks in the banking system are more elevated due to the exposure to large conglomerates that control a huge chunk of the country’s economic landscape.

He immediately downplayed the risks saying the conglomerates in the country have sound financial positions and are well-monitored by the BSP.

Furthermore, the BSP said the banking system remained adequately capitalized as of end-March with the average capital adequacy ratio (CAR) of 14.6 percent on a solo basis and 15.3 percent on a consolidated basis.

The country’s banking system’s CAR remains higher than Malaysia’s 14.6 percent and Korea’s 12.9 percent but lower than Indonesia’s 17.8 percent and Thailand’s 17.6 percent.