Banks tighten credit rules for firms
Credit to Author: THE MANILA TIMES| Date: Fri, 25 Oct 2019 09:59:47 +0000
BANKS tightened credit standards on loans extended to companies but maintained those for individual borrowers in the third quarter, the Bangko Sentral ng Pilipinas (BSP) said.
Results of the Third Quarter 2019 Senior Bank Loan Officers’ Survey (SLOS) indicated a net tightening of overall credit standards for loans to enterprises while rules on households lending were unchanged in July to September using the diffusion index (DI) approach.
A positive DI indicates that the proportion of banks that tightened their credit standards is greater than those that did not (net tightening), while a negative DI indicates more banks eased than those that tightened (net easing).
The net tightening of credit standards for business loans during the quarter was attributed by respondent-banks largely to their perception of a deterioration in the profile of borrowers, their reduced tolerance for risk, and less aggressive competition from banks and non-bank lenders.
“In terms of specific credit standards, the net tightening of overall credit standards was reflected in reduced credit line sizes; stricter collateral requirements and loan covenants; shortened loan maturities; and increased use of interest rate floors,” the central bank said.
Meanwhile, the unchanged credit standards for household loans reflected banks’ steady tolerance for risk and unchanged profile of banks’ borrowers. MAYVELIN U. CARABALLO