Loan rates down 2.22 percentage points

MANILA, Philippines – Corporate and individual borrowers continued to enjoy lower rates as banks have slashed interest rates by 2.22 percentage points since the Bangko Sentral ng Pilipinas (BSP) started its easing cycle to boost the economy.

The BSP said actual bank lending rates declined by 222.3 basis points to 7.049 percent as of February this year from 9.272 percent during the start of the easing cycle in December of 2008.

“The cumulative 200 basis-point policy rate cut of the BSP from Dec. 18, 2008 to July 9, 2009 have been passed on by banks to their borrowers,” the BSP said.

Monetary authorities said banks have been more accommodating to both corporate and household borrowers as their pass-through rates have exceeded by more than 100 percent the policy rate cut implemented by the central bank body.

Pass through is defined as the ratio between the change in the lending rate and the change in the policy rate since the beginning of the easing cycle.

The  central bank’s Monetary Board has slashed key policy rates by 200 basis points from December 2008 to July this year as part of easing measures to boost the country’s slackening domestic economy.

This brought the overnight borrowing rate to a record low of 4.0 percent from 6.0 percent and the overnight lending rate to 6.0 percent from 8.0 percent.

The Monetary Board started phasing out crisis-related measures last Jan. 28 in light of the recovering domestic economy but has kept its key policy rates untouched.

Latest data showed that bank lending grew at a faster pace in February compared to a month earlier as the recovering domestic economy boosted private sector borrowings.

Bank lending excluding reverse repurchase placements with the BSP went up by 6.1 percent in February or faster than the 5.0 percent growth registered in January. The industry’s total outstanding loans reached P2.084 trillion in February or P121 billion higher than the P1.963 trillion registered in the same month last year.

“Improving domestic economic activity contributed to the pick-up in bank lending,” BSP Governor Amando Tetangco Jr. said earlier.

Economic managers through the Cabinet-level Development Budget Coordination Committee (DBCC) see the country’s domestic output as measured by the gross domestic product (GDP) expanding between 2.6 percent and 3.6 percent this year after slackening to 0.9 percent last year from 3.8 percent in 2008 due to the global economic meltdown. –Lawrence Agcaoili (The Philippine Star)