Lending to firms, households tightened
Credit to Author: MAYVELIN U. CARABALLO, TMT| Date: Fri, 18 Jan 2019 16:23:42 +0000
Banks on the whole tighthened lending standards for businesses and households during the fourth quarter of 2018, the Bangko Sentral ng Pilipinas (BSP) reported on Friday.
The net tightening of credit standards for business loans “was largely attributed by respondent banks to their perception of stricter financial system regulations and reduced tolerance for risk,” the central bank said as it released its Fourth Quarter 2018 Senior Bank Loan Officers Survey.
In terms of specific credit standards, survey results also suggested the implementation of stricter collateral requirements and loan covenants, shortened loan maturities, and increased use of interest rate floors.
“In terms of borrower firm size, banks’ responses pointed to a net tightening of credit standards for loans across all firm sizes namely, top corporations, large middle-market enterprises, small and medium enterprises and micro-enterprises…,” the BSP said.
More banks expect overall credit standards for businesses to tighten over the next quarter given expectations of stricter financial system regulations and a more uncertain economic outlook, among others.
Overall credit standards for household loans, meanwhile, were also tightened during the period.
In particular, credit standards for housing loans housing loans, auto loans, and personal/salary loans tightened largely due to perceptions of stricter financial system regulations and reduced tolerance for risk, the Bangko Sentral said.
With regard to credit standards, respondents noted strict loan covenants for housing loans and increased use of interest rate floors.
Credit standards are also expected to be stricter over the next quarter on the back of banks’ anticipation of stricter financial system regulations and lower tolerance for risk.
Despite the tightening, the survey results also indicated expectations of a net increase in overall loan demand from both businesses and households.
For business loans, the expected net increase in demand was attributed by respondent banks largely to their corporate clients’ higher working capital requirements.
The anticipated net increase in loan demand from households was linked to expectations of higher household consumption, lower interest rates and higher housing investments, among others.
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