Banks’ bad loans ratio up to 4.2% in August

MANILA, Philippines – Banks’ bad loans inched up to 4.2 percent in August as more borrowers are having a hard time coping with the full impact of the global financial crisis, data from the Bangko Sentral ng Pilipinas (BSP) showed.

BSP Governor Amando M. Tetangco Jr. said the non-performing loans (NPLs) ratio of banks inched up to 4.2 percent in August from four percent in June.

NPLs refer to past due loan accounts which principal and/or interest is unpaid for 30 days.

Tetangco pointed out that the country’s banking sector has remained fundamentally sound despite the impact of the global financial crisis.

“Important banking reforms, particularly in the areas of corporate governance, risk management, and asset clean-up, have strengthened the banking system further, boosting its overall performance in terms of higher asset growth, enhanced asset quality, improved profitability and better capitalization,” he said.

The non-performing assets (NPAs) of banks stood at 4.9 percent in August.

Statistics showed that the NPLs of universal and commercial banks was practically unchanged at 3.50 percent or P83.84 billion in August from 3.49 percent or P82.88 billion in July but remained well below the ratio of 3.90 percent or P91.67 billion over the same month in 2008.

Monetary authorities believe that the asset quality of the banking system would remain sturdy despite the full impact of the global economic meltdown that started with the financial crisis in the US late last year.

They believe that Philippine banks have already tightened their credit standards precisely to ensure that they would not end up accumulating bad loans.

Tetangco said the BSP would continue to pursue key reforms that would further improve the regulatory and supervisory framework, enhance risk management systems, improve corporate governance structures, and strengthen disclosure practices for better consumer protection.

He added that monetary authorities would also continue to work with Congress on the passage of amendments to the BSP Charter to empower the central bank to respond in a more appropriate and timely manner to emerging issues in an increasingly dynamic environment.

The central bank chief said the BSP has put in place measures to help individuals and institutions that have been adversely affected by the tropical storm Ondoy and typhoon Pepeng.

“The BSP has put in place a package of regulatory relief measures for banks to enable them to assist and ease the burden on their affected customers. The BSP also established a P5-billion special rediscounting line for the exclusive use of banks whose borrowers were affected by typhoons,” he said. -Lawrence Agcaoili (The Philippine Star)