Stingy Banks Outnumber the Generous when it comes to Household Loans

MANILA – Banks have become stricter in granting loans to households amid higher demand for credit among businesses and consumers.

According to its latest Senior Bank Loan Officers’ Survey, the Bangko Sentral ng Pilipinas (BSP) said the greater number of those polled said they had kept credit standards on households and business enterprises unchanged for the 23rd straight quarter in the three months ending December last year.

Despite this, those who tightened credit standards for households outnumbered those who eased the same, as the diffusion index registered 14.3 percent. The index is the result of subtracting the number of respondents who eased their standards from the number of those who tightened the same (see chart below).

2015-0125 Stingy Banks Outnumber the Generous when it comes to Household Loans

Respondents who tightened their standards ascribed this to stricter financial system regulations on loans to households. Banks responded to these restrictions by reducing credit lines for auto loans and increasing loan margins on personal or salary loans.

According to the BSP, most banks would keep credit standards as is in the next quarter, with some lenders becoming stricter because of tighter regulations and less tolerance for risk.

As for loans to businesses, a bigger proportion of respondents kept their credit standards as is in the fourth quarter last year. They ascribed this to their steady outlook on the economy, particularly on the following industries: wholesale and retail trade, manufacturing, real estate, among others.

Banks were wont to charge lower interest and lend bigger amounts, but were stricter about collateral requirements and loan covenants, not to mention being partial to shorter loan maturities.

For the succeeding quarter, most respondents would keep loan standards as is, but those who were leaning towards tighter standards outnumbered those who prefer the opposite.

Among the factors that lend to tighter standards were stricter financial system regulations, less favorable outlook on the domestic economy, and reduced tolerance for risk.

Going forward, even though stingy respondents outnumbered the generous, they saw demand for credit from both households and businesses to increase (see two charts from BSP below).

2015-0125 Stingy Banks Outnumber the Generous when it comes to Household Loans2

2015-0125 Stingy Banks Outnumber the Generous when it comes to Household Loans3

(Source: InterAksyon.com)

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