BSP urged to look into nonbank property loans

Banks in general have not relaxed their credit requirements as far as extending real estate loans to individual borrowers is concerned, BDO Capital and Investment Corp. president Eduardo Francisco said.

He said major banks in the country have kept their credit standards unchanged and fears that banks might be over-aggressive in lending, especially to individuals trying to secure real-estate loans, were unfounded.

Francisco added that the significant increase in real-estate loans over the past few years was backed by the rise in the number of individual borrowers in the country who had capacity to pay and were thus creditworthy.

“Banks have not been relaxing their credit standards. What has been happening is that there is really an increasing number of individuals who have capacity to pay, and so banks extend credit to them,” he said.

One driver of the increasing number of creditworthy individuals, Francisco said, was the job creation in the continually expanding business process outsourcing (BPO) industry.

Nonetheless, Francisco said the Bangko Sentral ng Pilipinas might find it prudent to tighten its watch over lending activities by nonbank entities, including real-estate developers, to ensure that the country would avoid a bubble in the property market.

He noted that the extension of housing loans to individual borrowers was not a monopoly of banks, but a business that some real estate developers were engaged in as well.

“We are not saying they [real estate developers] are overly aggressive in lending. What we are saying is that besides credit extension by banks, lending activities by other entities should also be assessed,” Francisco said.

The BSP reported last week that as far as the country’s banking sector was concerned, industry members have manageable levels of exposure to the real estate sector.

It said the outstanding real-estate loans from thrift and universal and commercial banks amounted to P703.2 billion as of the end of 2012. This was 17.9 percent of the banks’ total loan portfolios, which the BSP said was within prudent levels. The BSP likewise reported that of the outstanding real estate loans, only 3.7 percent were nonperforming.

However, there were no official data on so-called “shadow banking” activities, or lending and other financial transactions by entities not regulated by the BSP.