Bank lending standards tightened in Q4 2013

Households found it more difficult to secure loans in the fourth quarter of last year than in the previous quarters, as banks sought to reduce their exposure to risks amid tighter global credit conditions, results of a survey by the Bangko Sentral ng Pilipinas showed.

The BSP said banks turned slightly more cautious in extending housing, car, and other consumer loans late last year, despite sustained demand fueled by the country’s economic boom.

Apart from lower tolerance for risks, banks cited stricter regulations as another reason for the tightening of lending to households during the period.

“The banks’ responses indicated overall stricter collateral requirements for loans extended to households, along with unchanged maturity period for loans on the whole,” the BSP said in a report on the survey.

The BSP’s survey showed that 85.7 percent of banks said their lending standards to households remained “basically unchanged” in the fourth quarter, an increase from 84.2 percent in the previous quarter.

However, banks that said their lending standards “eased somewhat” declined to 4.8 percent from 10.5 percent.

Banks that said lending standards “tightened somewhat” reached 4.8 percent (from none in the third quarter), while those that “tightened considerably” was 4.8 percent (versus 5.3 percent).

The survey showed that banks were expecting to keep their lending standards steady in the current quarter.

“Expectations of unchanged tolerance for risk and steady economic outlook were among the factors cited for the said result,” the BSP said.

Banks said they were friendlier to businesses, keeping collateral requirements and loan covenants steady during the fourth quarter.

“The unchanged overall credit standards were attributed by banks to their steady outlook on the domestic economy, as well as specific industries including manufacturing and real estate,” the BSP said.

The BSP report said the banks’ risk appetite and view on the credit-worthiness of its clients were unchanged.