Philippine Banks to Maintain Lending Standards in Q3, Signaling Financial Stability

MANILA, Philippines — Most Philippine banks expect lending standards and loan demand to remain broadly steady in the third quarter, signaling continued stability in the financial system despite persistent geopolitical uncertainty, according to the Bangko Sentral ng Pilipinas. Results of the BSP’s latest Senior Bank Loan Officers’ Survey showed that 75.5 percent of respondent banks expect to keep credit standards for enterprise loans unchanged in the third quarter, up from 71.7 percent in the second quarter. For household loans, 80 percent of banks expect lending standards to remain stable in the third quarter, higher than the 71.4 percent recorded in the previous quarter. The BSP said most banks expect to maintain lending standards in the third quarter, “indicating the banking system’s stability and capacity to support the economy through credit despite persistent geopolitical uncertainty.” Still, the survey showed that banks continue to lean toward tighter credit conditions, although the tightening bias has eased. For enterprise loans, 18.9 percent of banks expect to tighten standards in the third quarter, lower than the 28.3 percent that tightened in the second quarter. Meanwhile, 5.7 percent expect to ease lending standards for businesses. Using the diffusion index method, which subtracts the share of banks expecting to ease standards from those expecting to tighten, the net tightening bias for enterprise loans eased to 13.2 percent from 28.3 percent in the second quarter. For household loans, 20 percent of banks expect tighter credit standards in the third quarter, down from 25.7 percent a quarter ago. No bank expects to ease credit standards for households. This brought the diffusion index for household credit standards to 20 percent, lower than 22.9 percent in the second quarter. “Overall, the results point to broadly stable credit conditions, reflecting continued prudence in credit risk assessment amid an evolving economic environment,” the BSP said.