Non-bank lending to private sector growing

MANILA, Philippines—The Philippine financial system saw an increase in debt issuances in the fourth quarter of 2020, with the private sector borrowing more from nonbank funders during the coronavirus pandemic, according to the Bangko Sentral ng Pilipinas (BSP).

In a statement, the BSP cited preliminary data from its survey showing the domestic claims of so-called Other Financial Corporations grew by 7.9 percent in the last three months of 2020 to P6.95 trillion from P6.45 billion during the same period in 2019.

“This increase is mainly attributed to the rise in the claims on the private sector, and depository corporations as well as the sector’s net claims on central government,” the BSP said.

The survey of other financial corporations presents the comprehensive measure of the claims and liabilities of this subgroup of institutional units providing financial services other than banks, non-banks with quasi-banking functions, non-stock savings and loan associations and the BSP.

These institutional units are:

• Trust entities
• Private and public insurance corporations
• Holding companies
• Government financial institutions, specifically government-owned or-controlled corporations engaged in financial intermediation
• Non-money market funds covering unit investment trust funds and investment companies
• Other financial intermediaries and auxiliaries consisting of offshore banking units and non-banks without quasi-banking functions.

Claims on the private sector grew by 8.9 percent in the fourth quarter of 2020 to P3.57 trillion from P3.23 trillion in the same period of 2019 mainly due to higher investments in equity and debt securities issued by private non-financial corporations.

Likewise, net claims on the central government rose by 9.6 percent from the previous year’s level of P1.5 trillion billion to P1.65 trillion during the fourth quarter of 2020.

The upturn may be attributed to the increase in the sector’s holdings of debt securities issued by the central government. Moreover, claims on depository corporations expanded by 4.1 percent from P1.65 trillion in the fourth quarter of 2019 to P1.72 trillion on account of other financial corporations’ higher holdings of debt securities issued by banks.

The net foreign assets of other financial corporations rose marginally by 0.4 percent from P147.1 billion in the fourth quarter of 2019 to P147.8 billion in the fourth quarter of 2020.

The growth was brought about by the increase in other financial corporations’ claims on nonresidents, which were mostly in the form of investments in debt and equity securities, and insurance technical reserves.

The other financial corporations’ increase in assets was funded through the issuances of shares and other equity.

This increase in equity issuances, combined with the rise in insurance technical reserves, led to a 7.7 percent rise in the other liabilities amounting to P7.1 trillion in the fourth quarter of 2020 from the P6.59 trillion in the same period of 2019.

TSB