Fitch urges AsPac to rein in rapid credit growth

MANILA, Philippines - Policymakers in Asia-Pacific including the Philippines should focus on reining in the rapid growth in credit and making sure no asset bubbles arise in the financial system, Fitch Ratings said in a report.

“Fitch Ratings believes that controlling the pace of growth and the potential bubbles-often property-associated with rapid growth is more important than focusing solely on the absolute credit-to-GDP levels,” the report said.

“Various supervisors have been providing guidance on lending criteria and growth rates, while the South Korean authorities made it easier for borrowers to declare bankruptcy – leading to higher losses, in particular for foreign banks,” it said.

The debt watcher said it expects policymakers to closely monitor property prices to avoid a fall in household assets.

“Banks in the Asia-Pacific face slowing credit growth and tighter loan monitoring as the credit cycle turns,” the debt watcher said.

The report said spillovers from China’s economic stimulus have boosted cross-border lending in recent years. At the same time, household loans extended by banks in South Asian countries have also risen quickly since 2010.

“Credit costs will rise as loan books season and economies slow. Consequently, macroeconomic stability will be key to keep losses in check,” Fitch said.

“Headline NPL (non-performing loan) ratios have remained low in most of greater China, Singapore, India, Malaysia, the Philippines and Thailand,” the credit rating agency said.

Data from the Bangko Sentral ng Pilipinas showed lending by universal and commercial banks minus their placements with the central bank rose 20.1 percent to P4.02 trillion in June from the same period last year.