MANILA, Philippines – Banks in the Philippines have reduced lending rates much faster than those in most Asian countries, thus contributing more to efforts to pump-prime the economy amid the lingering global economic crisis.
According to the International Monetary Fund, most Asian central banks had reduced their policy rates to record lows to counter the ill effects of the global turmoil by encouraging borrowing.
However, bank lending rates had not been reduced at the same pace, said the IMF.
In the report entitled “Asia and Pacific: Building a Sustained Recovery,” the IMF said the average decline in policy rates by the central bank this year averaged at 2.5 percentage points.
On the other hand, said the IMF, the average drop in bank lending rates so far stood at only 60 basis points.
In the case of the Philippines, the Bangko Sentral ng Pilipinas implemented a series of rate cuts from December 2008 to July 2009, bringing down its policy rates by 2 percentage points, slower than the average in the region.
Overnight borrowing and lending rates of the BSP now stand at 4 and 6 percent, respectively.
But while the total rate cut by the BSP is smaller than the average reduction of central bank rates in Asia, the country’s banking sector brought down average lending rates by a higher margin.
The IMF said that in the Philippines, the pass through of the central bank rate cut stood at 70 percent, exceeding the 60-percent average in Asia.
A 70 percent pass through means that bank lending rates in the Philippine had already fallen by 1.4 percentage points following the 2-percentage-point cut in BSP rates. –Michelle Remo, Philippine Daily Inquirer
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