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Banks’ real estate exposure up 23%

By Kathleen A. Martin (The Philippine Star) | Updated January 14, 2015 - 12:00am




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MANILA, Philippines - The exposure of banks to the real estate sector climbed 23 percent to P1.160 trillion as of September last year from P939.775 billion in the same period in 2013, the Bangko Sentral ng Pilipinas reported yesterday.

Real estate loans, which accounted for the lion’s share of banks’ real estate exposure, went up 24 percent to P977.085 billion from P787.967 billion.

Central bank data showed banks increased their loans to land developers, construction companies, and other corporate entities by 24 percent to P592.966 billion as of September from P479.688 billion a year ago.

Credit made for residential properties, meanwhile, was also higher by 25 percent at P384.119 billion from P308.279 billion in the same period in 2013.

The rest of the banks’ real estate exposure comprised of investments in the property securities which rose 20 percent to P181.882 billion as of September last year from P151.808 billion in the same period in 2013.

The BSP assesses banks’ exposure to the real estate sector and introduces new regulations as necessary in order to moderate the risks of lending and investing in the property market.

Policy actions made based on banks’ real estate exposure are meant to ensure no asset bubbles arise given the continued robust growth of the property sector.

For one, the central bank in July last year required banks to undergo a separate stress test to evaluate the impact of the exposure in the said sector once borrowers fail to pay their loans.

Meanwhile, the BSP in 2012 tightened reportorial requirements of banks with regard to their exposure to the real estate sector.

The reporting system now covers loans to developers of socialized and low-cost housing, and to individuals, and credit supported by non-risk collaterals or Home Guarantee Corp. guarantee.

At the same time, banks have been required to report investments in debt and equity securities that finance real estate activities.
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