The country’s banking system is strong enough to withstand the economic downturn caused by the coronavirus pandemic, thanks to the industry’s prudential measures and conservative practices, the central bank said on Wednesday (May 6).
In a statement, the Bangko Sentral ng Pilipinas (BSP) said its latest data showed that the Philippine financial system maintains “sufficient cushion in times of crisis and ensure business continuity to serve financial consumers while keeping the economy going.”
“The positive performance of the banking system was evidenced by the sustained growth in assets, loans, deposits, capital and profit that was evident across banking groups,” the central bank said.
The regulator said comprehensive data as of the end of 2019 showed that universal and commercial banks channeled resources mostly to loans and investments in line with the economy’s growing demand, improved business climate and consumer sentiment.
Thrift banks, rural and cooperative banks, meanwhile, allocated most of their resources for lending to agriculture and consumer-related markets.
“The financial soundness indicators, which assessed the banking system’s strengths and weaknesses, affirmed that the banking system is stable and resilient to withstand the effects and uncertainties of the global pandemic,” the BSP said.
“Credit quality was satisfactory amid upbeat loan growth on sound credit underwriting standards and provisioning culture,” it added.
The BSP explained that bank capitalization, mainly comprised of common equity and retained earnings, remained well-above domestic and global benchmarks.
The regulator said Philippine banks’ strong liquidity position enables them to withstand short-term liquidity shocks while providing adequate stable funding for the medium term.
“Profits generated mainly from lending operations were likewise robust,” the BSP said, explaining also that the cost of banks’ compliance with BSP regulations is minimal compared to their non-interest expenses.
The central bank report also highlighted that the foreign currency deposit system, trust entities, foreign banks in the country, quasi-banks and other non-bank financial institutions all registered positive performance during the review period.
The report’s section on pawnshops and money service businesses highlighted their role as critical access points for the improved service delivery of the financial system.
“Overall, the Philippine financial system continued to exhibit safety, soundness, resilience and overall preparedness against external vulnerabilities such as the COVID-19 global pandemic,” the BSP said.
It added that it remains committed to promoting price stability, a stable financial system and a safe and efficient payments and settlements system conducive to strong, sustainable and inclusive economic growth.