Banks see higher loan demand in Q1

Banks expect higher loan demand from companies and households this quarter after a series of interest rate cuts done by the Bangko Sentral ng Pilipinas (BSP) last year. 

Based on the results of the BSP’s fourth quarter 2024 Senior Bank Loan Officers’ Survey (SLOS), most respondent banks projected a net increase in overall demand for loans from businesses in the first quarter.

The increase was due to higher customer inventory financing needs, clients’ more optimistic economic expectations and an increase in borrowers’ short-term financing needs.

Likewise, there was also a net increase in overall credit demand from consumers as anticipated by surveyed banks in the current quarter amid rising consumption and banks’ more favorable credit terms.

The SLOS consists of questions on loan officers’ perceptions relating to the overall credit standards of their respective banks, as well as to factors affecting the supply of and demand for loans to both enterprises and households.  

For the fourth quarter alone, the survey indicated a net rise in overall loan demand from firms, but slightly lower than the previous quarter. The increase was also driven by inventory financing needs, optimistic economic outlook and rise in borrowers’ short-term financing needs.

Meanwhile, the diffusion index approach indicated a lower net rise in demand for household loans in the fourth quarter last year compared to the previous quarter.

“The overall increase in household loan demand was mainly due to banks’ more attractive financing terms and higher consumption,” the BSP said.  

This is despite the tighter lending standards for enterprises from October to December and unchanged standards for consumer loans.

“The diffusion index approach indicated a net tightening of credit standards in the fourth quarter of 2024, due to the deterioration in borrowers’ profiles and the profitability of the bank’s portfolio,” the BSP said. 

On the other hand, the broadly steady loan standards for households were mainly due to the unchanged profile of borrowers, tolerance for risk and the profitability of the bank’s portfolio.

Source: Philstar

Percentage of Filipinos with savings dips to over 3-year low

The proportion of Filipino households with savings dipped to its lowest level in over three years in the fourth quarter, with pessimistic consumers yet to regain their pre-pandemic confidence level as they continue to brace for higher inflation and borrowing costs.

A nationwide survey of 5,350 families showed 25.6 percent of families in the Philippines have money to save in the October-December period, lower than the 29-percent recorded in the third quarter, the Bangko Sentral ng Pilipinas (BSP) reported.

The top reasons for setting aside cash were emergencies; health and medical expenses; education; retirement; business capital and investment; and house purchase. But data showed the latest result was the lowest reading since the third quarter of 2021, when the percentage of families that can save stood at 25.2 percent amid harsh pandemic lockdowns.

As it is, some analysts believe that the need to rebuild household savings could delay the benefits of the ongoing easing cycle of the BSP, which has so far cut the policy rate by a total of 75 basis points to 5.75 percent. This is because families might defer any big-ticket purchases until they can fix their inflation-battered balance sheets.

The central bank said households expect inflation to increase, which can hurt their ability to save money. Specifically, consumers expect price growth to average 6.2 percent for the next 12 months, running above the 2 to 4 percent target range of the BSP.

Survey results also showed consumers anticipate interest rates to spike and the peso to weaken against the US dollar in the fourth quarter. Respondents were also worried that joblessness may worsen.

This, in turn, brought the overall confidence index (CI) for households at -11.1 percent in the fourth quarter, staying in the negative territory as pessimists continued to outnumber the optimists during the period.

But while the latest CI for consumers was less pessimistic than the -15.6 percent in the third quarter, the BSP noted that the confidence level of households has yet to return to the positive territory seen before the pandemic.

That was a stark contrast to the overall CI for businesses, which climbed to 44.5 percent from 32.9 percent in the preceding quarter as firms gear up for the typical surge in demand during the Christmas shopping season.

For now, respondents attributed their less downbeat sentiment on expectations of higher and additional sources of income; more working family members; and an increase in available jobs and permanent employment.

Source: Inquirer and BSP

PHL on track to exit ‘gray list’

The Philippines is so far on track to achieve its target of exiting the Financial Action Task Force’s (FATF) “gray list” by next month, the central bank’s top official said.

Asked about the progress on the country’s final steps to exiting the gray list, Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona, Jr. told BusinessWorld that it has been “so far so good.”

The FATF recently concluded its onsite visit in the Philippines this month ahead of its plenary and meetings in February, which Mr. Remolona is scheduled to attend.

At its October plenary, the FATF kept the country on its list of jurisdictions under increased monitoring for “dirty money” risks.

The Philippines has been on the list for over three years now or since June 2021.

However, the dirty money watchdog initially determined that the country had substantially completed the recommended action items to improve its anti-money laundering and counter financing of terrorism (AML/CFT) regime.

The FATF’s recent onsite visit and assessment aimed to verify the country’s progress and sustainability of AML/CFT reforms. This is typically the final step before it grants a country an exit from the list.

The Anti-Money Laundering Council earlier said it was positive that the country will be able to exit the dirty money list this year as it has addressed the remaining deficiencies.

However, it cited the need to sustain the progress on these reforms to ensure the country stays out of the list.

Chester B. Cabalza, founding president of Manila-based International Development and Security Cooperation, said the government must fast-track its financial reforms to exit the list.

“If in case it achieves the exodus from the gray list, to draw more investments and be considered a respectable economy in the region, the Philippines is obliged to have a clear-cut monitoring and innovative actions on how to stay buoyant financially without scar from its hits in FATF,” he said.

Filomeno S. Sta. Ana III, coordinator of Action for Economic Reforms, said that reforms should go further than those recommended by the FATF.

“The biggest reform that can deter money laundering and tax evasion is the lifting of the Bank Secrecy Act (BSA),” he said via Facebook messenger.

“Bank secrecy law is a Jurassic institution; only countries that are centers of money laundering have them. But international pressure is forcing this limited number of countries to relax their laws.”

Nueva Ecija Rep. Rosanna “Ria” V. Vergara said being part of the gray list for years now has had “significant consequences for our economy and citizens.”

“While enhanced due diligence is not explicitly required by the FATF, being on the gray list has resulted in a decline in foreign investments, reduced investor trust, and added financial burdens on Filipinos working abroad.”

“Getting off the gray list would have a transformative impact. It would restore global confidence in the Philippines, stimulate economic growth, and attract foreign investors back to our shores,” she added.

This would also be more beneficial for overseas Filipino workers (OFWs), as they face high transaction costs.

“As a result of being on the FATF gray list, they end up going to financial service providers (FSPs) that charge higher fees to send money,” Ms. Vergara said.

“These FSPs take advantage of our being on the list for the higher charges.  Being removed from the gray list will allow our OFW to choose FSPs who do not charge exorbitant fees.”

Monitoring of financial risks should not just be limited to institutions, Ms. Vergara said.

“Most often these unscrupulous individuals use nonfinancial agencies to do their illegal activities — casinos for one. Thus, vigilance is required.”

“Legislation must be passed to criminalize online scamming.  We need to upgrade our government’s capacity to identify and track down these illegal rings that often operate outside our country, defrauding our people of their hard-earned money.”

Last year, the Anti-Financial Account Scamming Act (AFASA) was signed into law. It aims to protect consumers from financial cybercrimes by penalizing violations.

Meanwhile, the Defend NGOs Alliance in a statement raised concern over the “misuse of CFT measures and erosion of civic space in the Philippines.”

It said the government’s efforts to exit the gray list have led to “increasing judicial attacks on nongovernment organizations (NGOs) and people’s organizations (POs).”

The group said the government’s implementation of FATF recommendations have been used to “justify restrictive measures against NGOs it sees as critical of the government under the guise of counterterrorism.”

“Stricter restrictions and regulations on NGOs disrupt their finances, operations and services. The research also points out that trumped-up cases are for ‘paper compliance’ to meet arbitrary quotas for exiting the FATF gray list.”

Data from Defend NGOs Alliance showed that there are at least 69 development workers and 29 NGOs in the country that have been tagged with charges related to terrorism.

In 2002, the FATF blacklisted the Philippines for having no legal anti-money laundering framework. It was removed from the blacklist a year later after the passage of the Anti-Money Laundering Act.

Source: Business World