BSP: Banks more lenient to household borrowers
MANILA – The banks were generally more tolerant of household borrowers than their more entrepreneurial or business-minded counterparts in the latest survey conducted by the Bangko Sentral ng Pilipinas.
The banks proved more tolerant of the credit imperfections of their household borrowers but were rather aggressive and less forgiving of entrepreneurs and the business-minded borrowers.
The BSP uncovered this trivia in its latest survey of bank loan officers when the diffusion index method was adopted in place of old method, which only looked at the mode of responses in interpreting the survey data.
“(U)sing the diffusion index approach, the survey results indicated an increase in net tightening in credit standards for loans extended to enterprises but no net tightening for loans to households in the third quarter relative to the second quarter (survey),” BSP Governor Amando M. Tetangco Jr. said in a statement released on Friday.
This regular BSP survey seeks to isolate and identify the credit standards of commercial banks in the country and the factors affecting credit supply and demand for loans granted to both households and entrepreneurs alike.
According to the BSP, the larger and more profitable the entrepreneur-borrower was, the more stringent the loan requirements were likely to be.
“Classified according to firm size, the net tightening of general credit standards increased for top corporations but declined for large middle-market enterprises. Meanwhile, banks ceased tightening credit standards for small and medium-sized as well as micro enterprises,” Tetangco said.
When lending to the business-minded, the BSP noted an overall “net tightening in terms of loan margins, collateral requirements, loan covenants and loan maturities.”
There was also a net increase in credit lines during the period regardless of the size of the entrepreneur requiring bank credit.
According to Tetangco, 35 banks were sent survey questions but only 25 commercial banks actually participated or a response rate of 71 percent.
The survey also established that while the economy grew at a robust pace approaching eight percent in the first six months, the banks view the real estate, renting and services sectors with a degree of caution, “probably due to indications of tepid demand recovery for the global economy.”
“This development, in addition to banks’ reduced tolerance for risk, contributed to the increase in net tightening of overall credit standards for enterprises,” Tetangco said.
But basically, he said, bank credit standard, as applied to household borrowers, were unchanged during the six consecutive quarters when the survey was conducted.
There was also a narrowing of loan margins overall and across all types of household loans.
Collateral requirements remained the same in the latest survey, except for housing loans where the collateral requirement tightened, “indicating that the outlook for real estate, renting and business activities contributed to the tightening of credit standards to enterprises.”
Net loan demand from entrepreneurs during the period increased from previous quarter and across all sectors, except for micro borrowers.
The banks were upbeat on the economy and its prospects in the coming months.
Borrowers were encouraged by the low interest rate environment and by the improved terms of financing the banks.
Housing loans as well as auto loans took off during the survey period but credit card loans and personal loans were unchanged, Tetangco said.*PNA
