By Julito G. Rada | Jun. 16, 2014 at
12:01am [ manilastandardtoday.com ]
Bangko Sentral Governor Amando
Tetangco Jr. said the banking industry’s credit to the real estate sector
remains manageable, but several banks may be more exposed than others, in case
the industry hits a downturn.
“[The] overall situation remains
manageable. However, some banks may be increasingly more exposed,” Tetangco
said in an e-mailed statement to reporters over the weekend.
Banks with heavy credit exposure to
real estate and weak capital base are considered vulnerable, in case of a
downturn in the economy which can trigger loan defaults, or if the property
sector suffers from a sudden drop in prices.
Real estate is currently the fastest-growing segment of the economy,
supported by the growth of the business process outsourcing industry and
remittances.
Tetangco, however, said the recently issued
policy on real estate credit did not indicate any imminent vulnerability among
banks. He did not identify the banks with high exposure to real estate risks,
but said they would soon be tested to determine their capability to handle such
risks.
The policy-making Monetary Board of
the Bangko Sentral on Thursday approved the conduct of stress tests on banks as
part of a pre-emptive macro-prudential policy measure to ensure the banking
industry’s exposure to the real estate sector.
“With this new guideline, the BSP is
not saying that banks should not engage in housing credits/exposures. Instead,
we are saying that banks must have enough capital to absorb losses under
stressed market conditions. Therefore, if a bank chooses to increase further
its real estate exposure, that will be okay with BSP for as long as the bank is
well-capitalized,” Tetangco said.
Tetangco said the new policy was aimed
at banks which were increasingly more exposed “so they can control their
vulnerability.”
He said using the expanded definition
of real estate exposures, instead of the old way of measurement, the banks’
current real estate exposure was below 22 percent of the total loan portfolio.
The Bangko Sentral earlier set a
20-percent regulatory ceiling under the old way of measuring real estate
exposures, which was instituted after the 1997 Asian financial crisis.
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