Banks maintain credit standards for households, enterprises

MANILA, Philippines - Local banks have maintained their standards for loans to businesses and households in the second quarter of the year, according to a survey by the Bangko Sentral ng Pilipinas (BSP).

In its Quarterly Senior Bank Loan Officers’ Survey released Thursday, the central bank said that most universal and commercial banks “maintained” their credit standards for both households and enterprises.

“Most respondent banks foresee maintaining their credit standards over the next quarter. Most banks expect overall credit standards to ease slightly given expectations of improved profitability in the asset portfolio of banks and more favorable outlook,” BSP deputy director Dennis Lapid said in a briefing.

Based on the survey, banks in general kept their standards in lending to businesses of all sizes.

In particular, the BSP said some large corporations, which have higher payment capacity, enjoyed easier access to bank credit. Lending rules for small and medium enterprises (SMEs), meanwhile, were unchanged from the first quarter.

For micro-enterprises, a “slight tightening” was noted for the fourth consecutive quarter of the survey.

“Respondents’ more favorable outlook on the domestic economy and certain industries, more aggressive competition from other banks as well as from non-bank lenders, along with higher tolerance for risk also underpinned some banks’ easing view,” the survey said.

For household borrowers, survey respondents reported a net reduction in the use of interest rate floor for housing loans. Loan maturities, collateral requirements and loan covenants for housing loans, auto loans and credit cards were unchanged.

BSP Deputy Governor Diwa Guinigundo, in the same briefing, said easier lending standards of some banks were also due to healthier stature of lenders to absorb more risks.

 â€œMost of the respondent banks foresee maintaining their credit standards over the next quarter,” the survey said of household loans.

Meanwhile, more big banks are tightening credit standards for commercial real estate loans, the survey said.

Despite the tightening of credit standard, Lapid said demand for property credit was unchanged from the first quarter.

“Banks reported wider loan margins and reduced credit line sizes for commercial real estate loans,” he pointed out. Among others, Lapid said banks tightened rules due to “stricter oversight” of real estate credit.

It was the fourth consecutive quarter of general rule tightening for real estate loans after the BSP expanded the coverage of real estate exposure in August last year to include previous exemptions in low-cost housing and securities issued by property firms.