Posted on May
26, 2013 09:04:39 PM [ BusinessWorld Online ]
By Diane
Claire J. Jiao, Senior Reporter
THE ROLE of
nonbanks in lending to real estate must be strictly monitored, an International
Monetary Fund (IMF) official said.
"One area where we identified risks is
the real estate sector due to low interest rates, so you could have riskier
loans from both banks and nonbanks," IMF Resident Representative Shanaka
Jayanath Peiris told reporters last week.
While the
Bangko Sentral ng Pilipinas (BSP) has been keeping a close watch on banks and
their real estate exposure, nonbanks such as lending firms can also extend
credit to the sector, he noted.
"Nonbanks,
those not regulated by BSP, may be difficult," Mr. Peiris said, thus new
measures may have to be crafted.
He cited the
Financial Stability Forum -- comprised of the BSP, Securities and Exchange
Commission and the Department of Finance -- as key to the early detection of
risks.
"For the
BSP, banks are also lending to these nonbanks so, to an extent, it can still
monitor what’s going on," he noted.
Real estate
has again become a hot-button topic but the IMF official stressed that there
were no signs of overheating. Based on metrics such as price-to-earnings ratios
in the stock market and price-to-income ratios in the housing market, "no
obvious picture of a bubble came up," Mr. Peiris said.
Regulators,
however, may be looking at an incomplete picture.
"What we
have to do is look deeper into the data but we have no good real estate data in
the Philippines," he said.
"There
is no real estate price index. You have to rely on private companies for their
indices, but you don’t want a partial picture, you need an overall
picture," he noted.
"We will
be very supportive of any efforts that will lead to more enhanced information
and statistics on real estate."
Mr. Peiris,
meanwhile, commended the BSP’s work in monitoring the property market. Last
year’s move to expand the definition of real estate exposure is supported by
the IMF, he said.
"We
agree with the more complete definition. In general, we don’t agree with
exemptions. The true picture must be reflected as much as possible."
Banks were
required to report not just real estate loans but also investments in debt and
equity securities that finance real estate activities such as the acquisition,
construction and development of properties as well as buying, selling, rental
and management. Banks must also include loans for socialized and low-cost
housing developments that were previously exempted from reportorial
requirements.
The broader
definition took banks’ real estate exposure to P821.7 billion last year --
20.9% of their total loan portfolio and past the BSP-mandated 20% cap.
Mr. Peiris
was unconcerned, though, saying there was no "magic number" to
indicate when a property bubble was forming. Loan quality, he added, is a more
important indicator.
The BSP
believes the same, highlighting the prudence of banks in lending for real
estate.
Non-performing
real estate loans -- obligations unpaid at least 30 days after due date -- made
up only 3.7% of banks’ total loan portfolio last year.
Moreover,
stress tests showed that banks can withstand a default of 50% of their real
estate loans. Their capital adequacy ratio would stand at 15.77%, well above
the BSP’s minimum 10% requirement.
"Whatever
happens, regulators have to be ahead of the market," Mr. Peiris said.
One emerging
risk, he noted, is the tightening of real estate regulations and rising taxes
in neighboring countries, which could drive investors to the Philippine
property market.
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