By Lawrence Agcaoili (The
Philippine Star) | Updated January 12, 2016 - 12:00am
Guinigundo
MANILA, Philippines -
Initial results of stress tests conducted by banks validated the assessment
made by the Bangko Sentral ng Pilipinas (BSP) that there are no risks from the
real estate market.
BSP Deputy Governor Diwa
Guinigundo said initial results of the real estate stress tests conducted by
banks showed the capital adequacy ratio (CAR) of banks would remain above the
central bank requirement even if 25 percent of their real estate loan portfolio
turns sour.
“At this point we don’t see
any signs of stress in the real estate sector,” Guinigundo said.
The central bank has asked
banks to submit data on their real estate portfolio to include exposure in
socialized housing as well as debt incurred through the issuance of bonds to
finance real estate activities.
“We now have a more
comprehensive definition of the exposure to real estate. It’s more dependable,”
he said.
Based on the new definition
of the exposure of banks to real estate, Guinigundo said stress tests conducted
by big banks showed that their CAR would still be above the 10 percent
requirement set by the BSP and the eight percent threshold set under the Bank
for International Standards (BIS).
“Even if they factored in a
25 percent souring of the loans on real estate, they are still above the 10
percent regulatory capital that we imposed on the banks,” Guinigundo said.
Aside from the BIS
methodology, he said the BSP also used the International Monetary Fund (IMF)
identification of asset bubbles.
“Those two tests will show
that we are far from the so-called danger level,” he added.
The CAR of big banks stood
at 15.48 percent on a solo basis and 16.42 percent on a consolidated basis as
of end-June last year reflecting their continuous efforts to maintain adequate
capital buffer against unexpected losses that may arise during times of stress.
The BSP stepped up its
watch over the real estate sector as early as 2012 by ordering banks to
disclose more comprehensive reports on their exposures to property industry.
The pre-emptive
macroprudential policy measure approved by the BSP required stress tests for
banks to determine if their capital will be enough to absorb credit risk that
may arise from their exposure to the property sector.
Banks’ exposure to real
estate jumped 21.8 percent to P861.22 billion in end-November from P708.88
billion in end-September last year. The sector accounted for 17.5 percent of
banks’ total loan portfolio of P4.91 trillion as of end-November.
The BSP has set the cap on
real estate loans at 20 percent of the bank’s total loan portfolio.
Guinigundo added that real
estate developers are now more prudent after learning their lessons during the
Asian financial crisis in 1997.
“We can also say that we
are in touch with various real estate developers, the bigger ones, and it is
very comforting to know that our developers have become more prudent, more
discreet with respect to their expansion plans,” he said.
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