MANILA, Philippines - Local banks' exposure to structured products is just about 2.0 percent of the industry's total assets, and no bank has a direct link to subprime mortgages, a senior central bank official said on Tuesday.

But the central bank is committed to providing liquidity to the market "if and when needed through existing and new windows as may be appropriate to the
situation," said Nestor Espenilla, a central bank deputy governor.

Soured US subprime mortgages triggered the collapse of financial institutions such as Lehman Brothers, sending global markets into a tailspin and prompting a massive liquidity injection by governments and central banks around the world.

"Banks' exposure to structured products of all kinds is only around 2.0 percent of their total assets and none represents a direct exposure to subprime," Espenilla told a business meeting.

Last month, the central bank said Philippine lenders' exposure to Lehman, mainly through structured products, was just 0.3-0.4 percent of the banking system's total assets.

"Banks in the Philippines still conservatively focus on the more traditional banking business of accepting deposits and making loans," Espenilla said. "Banks' asset and funding mix are still largely domestically-oriented."

As of end-July, outstanding loans in the Philippines amounted to P2.0 trillion ($42 billion), nearly half the banking system's total assets.

Espenilla said borrowings from non-residents or foreigners made up just 6.0 percent of banks' liabilities.

"The bigger challenge now is to manage the economic fallout that inevitably ensues from recessionary tendencies in the world's major economies," he said.

"This may lead to a slowdown in our own economy, which banks have to consider in (their) business decisions."

($1=P47.24)