Bank lending to the real-estate sector grew even more stringent in the first quarter, according to the Bangko Sentral ng Pilipinas (BSP).
In a recent report, the central bank said local lenders reported a net tightening of their overall credit standard for commercial real-estate loans in the January-to-March period.
This was the 11th consecutive quarter that the banks reported a net tightening of standards in real- estate loans under the diffusion index (DI) approach.
This pertains to the statistical method, where the number of banks indicating tighter credit standards was subtracted from the number of banks that indicated otherwise.
“The net tightening of overall credit standards for commercial real-estate loans was attributed by respondent-banks to perceived stricter oversight of banks’ real-estate exposure, along with banks’ reduced tolerance for risk, among others,” the central bank said.
The BSP previously implemented several measures monitoring the banks’ exposure to the sector, as part of the effort to maintain financial stability and avoid so-called asset bubbles.
The BSP earlier expanded the reportage on real-estate exposure. It also conducted a so-called stress test on the various banks to discover which of these lenders would or would not survive under simulated conditions of financial adversity. A maiden report is expected to be released later this year.
The tighter credit standards were in the form of wider loan margins, stricter collateral requirements and loan covenants for commercial real- estate loans. Banks also cited reduced credit lines and shorter maturities for the accommodation.
Demand for commercial real-estate loans proved steady during the month, but quite a number of banks indicated increased demand for real-estate loans given the country’s improved economic outlook, as well as increased inventory and the fixed-capital
investment requirements of clients. For the next quarter, banks anticipate a further tightening of credit stan-
dards outnumbering those expecting the opposite, the BSP said.