Philippine banks are expected to remain profitable and withstand the effects of the potential worsening of the European debt crisis.
According to the Bangko Sentral ng Pilipinas, the exposure of Philippine banks to the eurozone is minimal, which means that a prolonged debt crisis in the zone would not lead to income losses for local banks.
BSP Governor Amando Tetangco Jr., citing results of a survey on bank resources, said euro-denominated instruments accounted for just 1.2 percent of the total assets of Philippine banks as of the end of the first quarter. This was lower than the 1.4 percent registered as of end-June 2011.
Tetangco also said that investments of European banks in instruments sold by Philippine banks accounted for also 1.2 percent of the banks’ total assets.
Therefore, Tetangco said, potential deleveraging by European banks would not significantly harm local banks.
“The exposure of Philippine banks to Europe is diminishing,” Tetangco told reporters.
According to an earlier report by the BSP, the total resources of local banks amounted to P7.54 trillion as of end-February, up by 6.8 percent from P7.06 trillion in the same month last year. Resources include deposits from the public, capital and retained earnings.
The financial woes experienced by European banks gave rise to speculations that they might be liquefying assets, including those purchased from emerging markets.