FSCC flags systems risks to Philippines financial stability

Rising debt, property prices

MANILA, Philippines — Rising household and corporate debt, elevated property prices and banks’ concentrated exposures to large borrowers have emerged as the main systemic risks to the Philippine financial system, although regulators said these vulnerabilities remain manageable for now.

In its 2025 Financial Stability Report, the Financial Stability Coordination Council (FSCC) said domestic credit dynamics and real estate market imbalances remain the main sources of potential risk, alongside concentrated exposures in unsecured consumer credit and conglomerate borrowings.

“While these risks are assessed to be manageable under current conditions, they could potentially intensify if shocks materialize,” the FSCC said.

The interagency body said emerging vulnerabilities are being monitored through four main channels: valuation pressures, leverage in non-financial sectors, financial sector exposure and funding and liquidity risks.

Valuation pressures remain evident in property and financial markets, as persistently high real estate prices amid elevated vacancies may complicate property valuations.

Equity prices also remained subdued as investors stayed cautious despite improving corporate earnings, while long-term interest rates stayed elevated even as short-term rates started to ease.

On leverage, the FSCC said unsecured household borrowings such as credit card debt are rising faster than income, although most borrowers continue to meet their payment obligations.

Consumer loans of the Philippine banking system grew by 21.3 percent year-on-year to P3.5 trillion as of September 2025. Unsecured borrowings jumped by 31.6 percent to P1.7 trillion, accounting for 47.5 percent of total consumer loans.

Credit card receivables, which made up 30.9 percent of consumer loans, roughly tripled from end-2019 to P1.1 trillion as of September last year.

For corporates, leveraged exposures of non-financial corporations reached P4.8 trillion as of the third quarter of 2025, equivalent to 60 percent of total corporate debt and 21.2 percent of nominal gross domestic product. These exposures remained concentrated among major conglomerates, led by real estate with a 27.8-percent share, followed by power, energy and oil at 24.3 percent.

The FSCC also warned that about P1.6 trillion, or 22.7 percent of conglomerate debt, is scheduled to mature from 2027 to 2029, alongside sizable foreign currency obligations.

Despite these risks, the council said the financial system remains broadly stable. The banking industry’s capital adequacy ratio stood at 16.1 percent as of September 2025, while universal and commercial banks posted a capital adequacy ratio of 15.9 percent, above the 10-percent regulatory minimum.

Asset quality also remained manageable, with the banking system’s non-performing loan ratio at 3.3 percent as of November 2025 and NPL coverage ratio at 94.9 percent.

Bangko Sentral ng Pilipinas Governor Eli Remolona Jr., who chairs the FSCC, said the Philippine economy and financial system remain resilient, supported by manageable borrowing levels and well-capitalized banks.

“Yet 2025 reminded us how uncertainty can shape the global and domestic landscape. Trade patterns shift and geopolitical tensions weigh on sentiment and investment decisions,” Remolona said. “Even when local markets appear calm, risks often cross sectors and borders.”

The FSCC said cyberattacks, loan delinquencies and loss of confidence in banks were the top near-term concerns cited by financial institutions and market participants in its October 2025 survey.

The FSCC is an inter-agency council composed of the BSP, Department of Finance, Insurance Commission, Philippine Deposit Insurance Corp. and Securities and Exchange Commission.

Issued annually by the FSCC, the FSR provides an assessment of the health of the Philippine financial system in light of systemic risks.