Lending in Q4 to ease for households, tighten for firms, says BSP survey

Senior bank loan officers expect lending standards to tighten for businesses and at the same time ease for households over the fourth quarter of 2022, according to a survey done by the Bangko Sentral ng Pilipinas (BSP).

For businesses, tighter credit standards are observed through increased use of interest rate floors, stricter collateral requirements and loan covenants, shortened loan maturity, and wider loan margins.

For consumers, eased credit standards are shown in the longer maturity of housing loans and personal/salary loans as well as increased size of credit lines for credit card loans.

Stricter lending process to business is driven by the deterioration of borrowers’ profiles, reduced risk tolerance, a more uncertain economic outlook, and stricter financial system regulations.

On the other hand, a more accommodative attitude toward households or consumer borrowers is attributed to an increased tolerance for risk, improvement in borrowers’ profiles and profitability of banks’ portfolios, as well as less uncertain economic prospects.

These views reflect results of two other surveys—the Business Expectations Survey and the Consumer Expectations Survey—covering sentiments for the third quarter this year.

The BSP’s latest quarterly Senior Bank Loan Officers’ Survey, also covering the third quarter, showed that this was the scenario based on a “diffusion index” (DI) approach on the data collected from 51 universal and commercial banks as well as thrift banks. Data from respondents came in between Sept. 1 and Oct. 11.

In the DI approach, a positive DI for credit standards indicates that the proportion of respondent banks that have tightened their credit standards exceeds those that eased (“net tightening”).

Meanwhile, a negative DI for credit standards indicates that more respondent banks have eased their credit standards compared to those that tightened (“net easing”).

—Ronnel W. Domingo