Banks’ FCDU assets up in ’11

Foreign currency-denominated resources of banks operating in the country slightly increased in 2011 from a year before on the back of a modest economic growth.

Resources managed by foreign currency deposit units (FCDUs) of banks, mainly in the form of deposits, reached $30.1 billion in 2011, up by 1.4 percent from $29.7 billion in the previous year.

About 96 percent of the resources of FCDUs were held by universal and commercial banks, while the balance was held by thrift banks.

Deposits of dollars and other foreign currencies placed in banks accounted for $24.2 billion, or 80 percent of the total. The balance of 20 percent was in the form of investments in financial instruments.

FCDU deposits in 2011 were down by 3 percent from $24.9 billion a year before.

The drop in deposits came about as the country’s export sector suffered a 6.9-percent contraction in earnings last year amid recession in the eurozone and a still sluggish US economy.

The drop in the country’s export revenue last year to $48 billion, from $51.5 billion in the previous year, was caused mainly by the decline in the sales of electronics.

Electronics products—particularly intermediate goods used in the production of consumer products such as cellular phones and computers—account for at least half of the country’s export revenue.

In tough times, demand for non-essential products, including electronics, declines as consumers focus spending on basic needs, economists said.

The increase in the banks’ investment earnings more than covered the drop in FCDU deposits, resulting in the slight rise in the banks’ total FCDU resources.

The BSP said the rise in foreign currency-denominated resources of banks helped them continue to extend loans and enabled banks to invest more.

Outstanding FCDU loans extended by banks stood at $9.8 billion in 2011, which was almost the same as the level in the previous year.

The BSP said the sectors that benefited the most from the FCDU loans were companies engaged in manufacturing, utilities, and transportation and communications.

The banks’ investments in financial assets grew to $16 billion from $15.8 billion, BSP data showed.

The growth in FCDU assets of banks came with the rise in their peso-denominated resources.

The BSP expects the country’s banking sector to support faster growth of the economy this year given its rising resources, which can be used to financially support consumption and investment activities.