While the various banks kept their lending standard unchanged when dealing with business borrowers in the fourth quarter last year, that same standard proved a bit more stringent when the banks dealt with household borrowers, according to the Bangko Sentral ng Pilipinas (BSP).
Local lenders maintained the standards they use in giving out loans to enterprises in the country, but tightened them for credit extended to households in the country, the BSP said.
In a presentation of the results of the latest Senior Bank Loan Officers’ Survey, the central bank said local banks kept unchanged the overall credit standards for loans to enterprises but showed a net tightening of overall credit standard for loans to households.
The BSP uses the diffusion index (DI) approach in determining changes in loan standards. The index indicates those that tightened their credit standards and subtract the number that indicated otherwise.
The DI of banks in lending to enterprises is zero as the number of banks indicating tighter credit standards equaled the number of banks that indicated easing credit standards. The DI of banks for loans to households, meanwhile, hit a positive 14.3 percent, indicating those that tightened outnumbered those that indicated easing.
The unchanged overall credit standards for enterprises was attributed by banks to their steady outlook on the domestic economy, as well as on specific industries, such as wholesale and retail trade, manufacturing and real estate, renting and business activities among others.
Banks during the period reported overall net narrowing of loan margins, net increase in credit line sizes and less use of interest rate floors contrasted with the stricter collateral requirements and loan covenants, as well as implementing shorter loan maturities.
Meanwhile, for lending standards to households, banks attributed the stricter standards to households to perceived stricter financial system regulations.
The tighter standards were seen in the reduced credit lines for auto loans and wider loan margins for personal and salary loans.
For the next quarter, the BSP said most respondent banks tended to the tightening side due to perceived stricter financial regulations, less favorable outlook on the domestic economy and reduced tolerance for risks both in lending to enterprises and households.
Bianca Cuaresma