By Lawrence Agcaoili (The
Philippine Star) | Updated February 29, 2016 - 12:00am
The BSP traced the increase
to the 7.6 percent rise in real estate loans to P1.2 trillion in end-June last
year accounting for 86.6 percent of the real estate exposures of the Philippine
banking system. File photo
MANILA, Philippines – The
real estate exposure of Philippine banks increased 6.8 percent in the second quarter of last
year compared to the first quarter amid
the steady rise in real estate loans, the Bangko Sentral ng Pilipinas (BSP)
reported over the weekend.
Data showed the real estate
exposures of universal, commercial, thrift banks, and trust departments reached
P1.4 trillion at the end of the second quarter in 2015.
The BSP traced the increase
to the 7.6 percent rise in real estate loans to P1.2 trillion in end-June last
year accounting for 86.6 percent of the real estate exposures of the Philippine
banking system.
On the other hand,
investments in real estate securities used to finance real estate activities
inched up 1.4 percent to P182.6 billion and accounted for 13.4 percent of the
real estate exposures in end-June last year.
Despite the increase, the
BSP said the non-performing real estate loan ratio of big banks and small banks
improved to 2.3 percent in end-June 2015 from 2.6 percent in end-March last
year.
“The non-performing real
estate loan ratio has been on a downward trend since end-December 2013,” the
BSP said.
The bank regulator said it
would continue to monitor the real estate exposures of universal, commercial
and thrift banks as part of its broader role of assessing the quality of the
banks’ exposures to the different sectors of the economy.
“Maintaining high loan
quality is essential to the promotion of financial stability, which is a key
policy objective of the BSP,” the central bank added
Initial results of a stress
tests conducted by banks validated the assessment made by the BSP that there
are no risks from the real estate market.
BSP Deputy Governor Diwa
Guinigundo earlier 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,” he said.
The bank regulator has
tasked 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 have now a more
comprehensive definition of the exposure to real estate. It’s more dependable,”
he added.
Based on the new definition
of the exposure of banks to real estate, Guinigundo explained that stress tests
conducted by big banks revealed 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 added.
Aside from the BIS
methodology, he revealed the regulator 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 effort 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 the property industry.
The BSP has set the cap on
real estate loans at 20 percent of the bank’s total loan portfolio.
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