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Limits on real estate loans eyed

By Julito G. Rada | Posted on May. 06, 2013 at 12:02am |
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The Bangko Sentral ng Pilipinas may impose limits on the real estate exposure of banks as part of the risk management for the sector, Governor Amando Tetangco Jr. said over the weekend.
“Our consideration here is a sound risk management or the implementation of sound risk managements by banks. So what we are looking at now is to consider prudential limits on real estate exposure relative to the capital of banks,” Tetangco said.
“We are considering this… this is the direction we are taking now,” he said. “[But] we don’t know [yet] what is the appropriate limit… We have to study it first, that is why we are waiting for the real estate report for 2012,” Tetangco said.
Tetangco said there were no emerging signs yet of asset bubble in the property sector in the Philippines.
“What we are observing is that the financing terms are getting more and more attractive that is why we’d like to closely monitor this. From financial stability standpoint, bank loans are only one of the sources of funding being used for real estate developments,” he said.
He said “some developers are accessing the capital market, they’re issuing bonds and notes. They are going to the equities. There are also funding coming from offshore.”
Tetangco said even large high-end developers were moving down the market. “… So you see developers concentrated in the high-end and now catering to low-cost and middle segments,” he said.
Meanwhile, Tetangco said the central bank would review the possibility of reducing further the interest rate on special deposit accounts from the current 2 percent.
“We still have to review that… we have to look at the flow of funds at the financial markets,” Tetangco said, adding the Bangko Sentral had no plan to close down the SDA facility.
“SDA continues to be an effective monetary policy tool,” he said.
Funds parked at the SDA facility reached P1.929 trillion as of March 8 this year because of liquidity.
“Part of that goes to SDA. Even the remittances or business process outsourcing receipts. When these enter the country, it will be converted into pesos and part of those will be invested in SDA by banks, or individuals through banks,” he said.
The Monetary Board, the policy-making body of the central bank, in April reduced the interest rates on SDA by 50 basis points to 2 percent from 2.5 percent across all tenors on the benign inflation outlook.
The Bangko Sentral said the lower rate aims to finetune its monetary policy instruments and gain greater flexibility in conducting monetary operations as well as ensure adequate liquidity for economic activity.

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