Bank lending rates remain low

MANILA, Philippines – Corporate and individual borrowers continued to enjoy lower interest rates in May although slightly higher compared with the rates in April as the Bangko Sentral ng Pilipinas (SBP) continued to disengage from crisis intervention measures.

BSP Assistant Governor Cyd Tuano-Amador said actual bank lending rates declined by 1.55 percentage points to 7.722 percent as of May this year from 9.272 percent during the start of the easing cycle in December of 2008.

“Bank lending rates also declined by 155 basis points in May 2010 relative to December 2008,” Tuano-Amador said.

The rates, however, were slightly higher compared to 7.032 percent as of April this year wherein the rate was 2.24 percentage points lower than the December 2008 level.

The BSP has kept its rates at record lows for seven straight policy setting meetings since July last year but has continued to unwind crisis-related measures adopted in November of 2008 to release liquidity into the financial system to support domestic economic activity to survive the global economic meltdown.

Crisis-related measures adopted way back in November of 2008 that were tweaked included the increase in the rate on a short-term lending facility to four percent from 3.5 percent last Jan. 28 as well as the reduction of the peso rediscounting budget to P40 billion from P60 billion, the restoration of the loan value of all eligible rediscounting papers to 80 percent from 90 percent of the borrowing bank’s credit instrument, and the restoration the non-performing loan (NPL) ratio requirement of two percentage points from 10 percentage points last March 11.

Last April 22, the central bank continued unwinding of crisis intervention measures that were adopted since November of 2008 by further reducing the budget for peso rediscounting facility to to pre-crisis level of P20 billion from P40 billion.

Latest data from the central bank showed that the total outstanding loans of banks excluding reverse repurchase placements with the central bank expanded by five percent to P2.078 trillion as of end-March or P99 billion more than the P1.979 trillion registered in end-March last year despite lower loans extended to the manufacturing as well as the financial intermediation sectors. –Lawrence Agcaoili (The Philippine Star)