Phl banks resilient - IMF

MANILA, Philippines - Multilateral lender International Monetary Fund (IMF) reiterated that 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.

IMF mission chief Vivek Arora said in a press conference that the BSP has made substantial progress in banking supervision and regulatory framework.

“The financial sector has remained resilient, owing in large part to the strengthening of the supervisory and regulatory framework in recent years,” Arora told reporters.

Arora pointed out that banks in the Philippines survived external shocks including the financial crisis in the US as well as the debt crisis in Europe. “Banks have been not much affected by the global financial turbulence in recent quarters,” he added.

He cited the relatively low non-performing loan ratios as well as high capital adequacy of Philippine banks.

Latest BSP data showed that the ratio of soured loans of universal and commercial banks to the industry’s total loan portfolio eased further in July as the surprising economic growth in the first half of the year as well as strong corporate earnings enabled borrowers to pay their outstanding financial obligations on time.

The industry’s total loan portfolio went up at a faster rate of 7.11 percent to P2.545 trillion as of end-July this year from P2.376 trillion as of end-July last year while the non-performing loans (NPLs) of universal and commercial banks only increased by 3.44 percent to P85.73 billion from P82.88 billion.

This resulted in a 0.12 percentage point decline in NPL ratio to 3.37 percent in end-July from 3.49 percent in end-July last year but 0.10 percentage point higher than the 3.27 percent in end-June.

The gross assets of universal and commercial banks increased by 8.6 percent to P5.56 trillion as of end-July this year from P5.121 trillion as of end-July last year while the industry’s non-performing assets (NPA) retreated by 3.6 percent to P214.66 billion from P222.63 billion.

Likewise, the BSP said the growth of loan loss reserve (LLR) of banks climbed by double-digit level of 10.6 percent to P96.29 billion as of end-July this year from P87.01 billion as of end-July last year.

On the other hand, the capitalization or capital adequacy ratio of the Philippine banking sector reached 14.9 percent on a solo basis and 15.95 percent on a consolidated basis as of end-March.

The BSP said the industry’s CAR continued to exceed both the statutory level set by the BSP at 10 percent and the international standard of eight percent under the Basel Accord.

Meanwhile, the IMF also stressed the importance of quickly amending the BSP charter to further strengthen the country’s banking supervision and regulatory framework.

“In order to further bank supervision and regulation, it is important that amendments to the BSP Charter be quickly approved that would give supervisors stronger legal protection as well as allow the BSP to issue its own debt securities for more effective conduct of monetary policy and promotion of macroeconomic stability,” Arora said.

The BSP has been pushing the proposed amendments to its charter for more than five years starting from the term of Governor Rafael Buenaventura.

The BSP is seeking to strengthen its powers to enhance the administration of the monetary, credit and banking system under the pending bills and would help seek to track the owners of banks and determine their fitness and integrity.

Pending bills also aim to empower BSP examiners to access deposit accounts in gathering evidence against the perpetrators of bank fraud. The BSP also wants to compel a more timely rehabilitation, reorganization or restructuring of distressed banks.

The central bank is also pushing to increase administrative fines and expedite forfeiture proceedings. It also seeks to obtain data from any person or entity in the formulation of monetary policy and in crafting remedial measures in case of abnormal movements in monetary aggregates, credit or price level.