Banks tighten consumer lending on ‘bubble’ fears

Local banks became less liberal in lending to consumers despite the sustained glut for cash to pay for new homes and cars in the first quarter as monetary conditions started to tighten in the country.

Big corporations, the Bangko Sentral ng Pilipinas (BSP) said, had an easier time getting cash from banks—a reflection of the reduced risk appetite of lenders that were choosing to deal more with companies than with households.

Results of the BSP’s Senior Loan Officers Survey for the first quarter showed that banks were being more disciplined with their lending to certain sectors of the economy.

“Lending is turning rational,” BSP Assistant Governor for Monetary Policy Cyd Tuano-Amador told reporters yesterday. This sobriety of banks in lending excessively to households helps ensure that the banking industry avoids an excessive build-up of risky consumer loans that could lead to economic instability.

Tuano-Amador said lending for the purchase or construction of new homes, in particular, was the area being most closely watched by monetary authorities.

“Only a small portion of our population invests in stocks and bonds. The biggest assets for most Filipinos are their homes,” she said, noting that excessive lending to the real estate sector could lead to a property “bubble.”

The BSP survey showed a net easing of lending standards for enterprises, with the exception of small-to-medium enterprises. Of the banks surveyed, 7.3 percent said they eased lending standards, while only 3.7 percent said standards were tightened. The rest kept their lending standards the same.

The easing of lending standards came in the form of increased credit line sizes, longer maturities for most types of loans and reduced use of interest rate floors.

For loans to households, 10 percent of banks surveyed said their lending standards were “tightened somewhat,” while 5 percent said standards were “tightened considerably.”

Banks surveyed said they were asking for higher levels of collateral. They were also granting smaller loans, despite demand for credit staying steady.