Phl banks shielded well from global crisis, says ADB

MANILA, Philippines – The Asian Development Bank (ADB) said the Philippine banking system and other Asian banks are well shielded against the possibility of another global financial crisis.

In its recent study titled “The Implications of a Global Financial Crisis for Asia and the ADB: Lessons from Evaluation,” the ADB singled out the People’s Republic of China, Indonesia, Thailand and the Philippines as nations with low non-performing loan (NPL) levels.

“Non-performing loans fell by half or more as a share of total loans in PRC, Indonesia, Philippines, and Thailand from December 2006 to June 2011,” it said.

It also took note that in general, the banks in these four nations have strong profitability and higher Tier 1 capital ratios.

Likewise, the banks have either met the Basel III guidelines in terms of risk-weighted capital at six percent. In the case of the Philippines, the banks are guided by a minimum 10-percent capital adequacy ratio (CAR).

The Bangko Sentral ng Pilipinas (BSP) said that the NPL ratio to total loan portfolio fell to 2.18 percent in the first five months of the year, down from 2.8 percent in the same period in 2011.

The ratio of non-performing assets (NPA) also fell to 2.71 percent from 3.26 percent.

NPL coverage ratio rose 128.93 percent as of May from 123.31 percent the previous year.

“The industry’s provisioning against potential credit losses remained adequate,” the BSP said.

Meanwhile, US financial services firm Morgan Stanley said it anticipates that European banks could withdraw about three to five percent of Asian banks’ system assets due to increases in capital requirements, funding problems in the wake of the euro zone crisis, and political pressures to safeguard European banks’ domestic lending.

European bank withdrawal from Asian markets would be manageable, but would have some negative impact on funding costs and credit conditions.

“Asian banks also could be affected because of their exposure to other financial systems hit by the euro zone crisis, and by a general seizing up of financial transactions,” Morgan Stanley added.

The ADB said that the crisis also presents opportunities for Asian banks. –Ted P. Torres (The Philippine Star)