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Banks tighten rules on property loans

By Kathleen A. Martin (The Philippine Star) | Updated April 27, 2015 - 12:00am


MANILA, Philippines - Banks tightened anew their lending standards for commercial real estate loans in the first quarter, a Bangko Sentral ng Pilipinas (BSP) survey showed.

“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 BSP said.

“In particular, respondent banks reported wider loan margins along with stricter collateral requirements and loan covenants for commercial real estate loans. At the same time, respondent banks also cited reduced credit line sizes and shorter maturities for this type of loan,” the central bank said.

This is the 11th consecutive quarter that banks tightened their lending standards for commercial loans, based on the quarterly Senior Loan Officers Survey conducted by the BSP.

Latest central bank data showed banks’ exposure to real estate increased 21 percent to P1.221 trillion last year from P1.006 trillion in 2013.

Real estate loans accounted for the bulk of the banks’ exposure to the sector at P1.043 trillion, while investments in the property market accounted for the remaining P178.028 billion.
For the next quarter, the BSP said the number of banks expecting to further tighten their credit standards for real estate loans outnumbered those banking on the opposite.

The survey also showed a number of the respondent banks reported an increase in demand for the real estate loans in the first quarter.

“This was on the back of clients’ improved economic outlook as well as increased inventory and fixed-capital investment needs of clients,” the central bank said.

The BSP added a number of banks expect the demand to continue climbing in the second quarter, although most see a steady loan demand for the period.

With regard to housing loans extended to individuals, banks were also found to have tightened their credit standards for said loan in the first quarter, the BSP said.

“The tighter credit standards for housing loans were attributed by respondent banks to perceived stricter financial system regulations,” the central bank said.

 “Banks’ responses showed wider loan margins and stricter collateral requirements for housing loans,” the BSP noted.

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