Banks see stronger loan demand in Q1

Philippines banks see stronger loan demand from companies and households in the first quarter despite the series of rate hikes delivered by the Bangko Sentral ng Pilipinas (BSP) to fight inflation last year.

Based on the results of the central bank’s Q4 2022 Senior Loan Officers’ Survey (SLOS), banks expect a net increase in overall loan demand both from corporate and household borrowers

“Based on the diffusion index (DI) method, banks indicated expectations of a net increase in overall demand for loans from businesses in the first quarter of 2023, driven by customers’ more optimistic economic outlook, as well as increased customer inventory and accounts receivable financing needs,” the BSP said.

Likewise, the central bank said that bank respondents are also expecting a net increase in overall consumer loan demand in the first quarter mainly due to higher household consumption and housing investment.

The economy accelerated by 7.6 percent last year, the fastest since the 8.8 percent growth recorded in 1976, from 5.7 percent in 2021, with the further reopening of the economy as strict COVID-19 quarantine and lockdown protocols were lifted.

For the fourth quarter of last year, the SLOS, covering 63 banks from Dec. 14 to Jan. 13 this year, showed a net increase in overall loan demand from across all firm classifications and categories of household loans.

The results of the survey also showed that banks expect a steady rise in commercial real estate and residential real estate loans from January to March.

According to the BSP, the DI-based approach pointed to anticipations of net rise in credit demand for commercial real estate loans amid banks’ more attractive financing terms and lower interest rates, as well as customers’ lack of alternative sources of funds.

Likewise, the central bank added that the DI approach also indicated a net increase in residential real estate loan demand for the first quarter, driven mainly by higher household consumption and housing investment.

Preliminary data from the BSP showed that rate hikes delivered by the Monetary Board has started eating into credit growth, as the rise in loans extended by big banks slowed to 13.7 percent in November from 13.9 percent in October.

As of end-November last year, universal and commercial banks disbursed P10.64 trillion in loans versus the P9.35 trillion released in end-November 2021.

Source: Philstar

Pag-IBIG releases record-high P118-B home loans in 2022

Pag-IBIG Fund released a record-high P117.85 billion in home loans to finance the housing units of 105,212 members in 2022, its top officials announced on Jan. 18.

For 2022, the amount of home loans released by the agency increased by 21% or P20.57 billion compared to the P97.28 billion released in 2021. With the amount, Pag-IBIG financed the acquisition and construction of 105,212 homes for its members, or an increase of 11% from the 94,533 homes financed in 2021.

“We are happy to report that Pag-IBIG Fund has once again set a new record-high in home loan releases in 2022. This is very good news because as the amount of home loans we release increases, so does the number of Filipinos who now have homes of their own.

Pag-IBIG Fund’s performance is a testament to our united and unwavering efforts to resolve the country’s housing backlog, in line with the objective of President Ferdinand Marcos, Jr. under the Pambansang Pabahay Para sa Pilipino Program,” said Secretary Jose Rizalino L. Acuzar, who heads the Department of Human Settlements and Urban Development (DHSUD) and the 11-member Pag-IBIG Fund Board of Trustees.

Pag-IBIG Fund Chief Executive Officer Marilene C. Acosta, meanwhile, noted that the 105,212 housing units financed in year 2022 is also a record-high, and marks the first time that the agency has financed more than 100,000 housing units in a single year.

She further stated that out of the total housing units financed by the agency last year, 18,657 or 18% were socialized housing units which are now owned by members from the minimum-wage and low-income sectors.

“We at Pag-IBIG Fund have always strived to provide our members – the Filipino workers, the means to have their own homes through affordable shelter financing. That is why we take great pride in achieving a record-high number of housing units financed in 2022 because it means that we have empowered even more Filipinos in gaining their own homes.

And, as we embark on yet another year, our members can continue to rely on Pag-IBIG Fund to provide them the most affordable home loan in the market, so that they too can achieve their dream of homeownership. That is the Lingkod Pag-IBIG pledge,” Acosta added.

Source: Business World

BSP eases loan limit for single borrowers

The Bangko Sentral ng Pilipinas (BSP) has enhanced the rules on single borrowers’ limit (SBL) to allow banks to readily support the financing requirements of the economy.

BSP Governor Felipe Medalla said the central bank’s Monetary Board issued Resolution 1869 on Dec. 27, 2022, approving the amendments to the pertinent provisions of the Manual of Regulations for Banks (MORB), which govern the credit exposure limits to a single borrower and definition of capital used for purposes of determining compliance with prudential limits and requirements.

Medalla said the new policy aligns the BSP regulations with internationally recognized standards on credit risk transfer and globally accepted rules on trade and finance transactions.

“The policy enhancements aim to make the BSP rules more responsive to evolving business and credit risk management practices. This is a timely measure since it provides banks with flexibility in utilizing effective credit risk mitigation techniques, which would allow them to prudently expand credit exposures in line with growth of the economy,” Medalla said.

The SBL prevents an overconcentration of credit risk, and imposes a ceiling on the amount of loans, credit accommodations and guarantees that a bank or financial institution can extend to a single borrower or its related entities.

The amended SBL regulations provide minimum operational requirements for a credit risk transfer arrangement to be considered as effective.

These are patterned after the credit risk mitigation requirements of the Basel III capital standards, which ensure that a particular credit risk transfer arrangement is binding on all parties, legally enforceable in all relevant jurisdictions, as well as direct, explicit, irrevocable and unconditional, among others.

The revised SBL rules also recognize guarantees between a bank’s head office and its branches or between a bank’s branches located in different jurisdictions as an effective credit risk transfer, subject to certain conditions.

The documentation of such intrabank guarantee must be issued in accordance with internationally recognized rules on finance transactions where the bank’s head office and branch are treated as separate entities with respect to the payment of such obligation.

Moreover, the total amount of the intrabank guarantees must not exceed 100 percent of the total loan portfolio of the bank concerned as of the end of the preceding month.

Given these controls, the regulator is dispensing with the prior BSP approval requirement on every credit transaction covered by a credit risk transfer arrangement for these to be excluded from exposures that are subject to SBL.

“The removal of the prior BSP requirement upholds the BSP’s expectations for banks to exercise sound risk governance and be primarily responsible for managing credit risk on their exposures. It also streamlines the lending process of banks, allowing them to readily support the financing requirements of the country,” Medalla said.

The new regulations, the BSP chief said, would take effect on July 1 to provide banks with reasonable time to make the necessary adjustments to their policies and procedures to ensure a smooth transition to the operational requirements for employing credit risk transfer arrangements.

In view of the changes, banks shall continue to use the existing SBL framework as of end-December 2022 during the transition period from Jan. 1 to June 30 to minimize disruption in the lending operations of banks.

The new framework also includes the use of 30 percent SBL by all banks, and the grant of exposures by covered foreign bank branches at amounts which shall not exceed the 30 percent SBL using as reference point two times the level of their prescribed regulatory capital.

Likewise, the new regulations revised the definition of regulatory capital, which is used as base in computing the SBL, among other prudential limits, to include other instruments, which may be likened to preferred stocks, subject to certain criteria such as but not limited to minimum maturity of years.

This provides a bank with more options as regards the types of instruments that it can use to boost capital to back up growth in its lending and investment activities.

The enhancement of the SBL regulations is part of the central bank’s initiatives to promote banking system stability through the adoption of sound credit risk management and regulatory capital standards.