BSP says banks’ real estate exposure within 20% limit

MANILA, Philippines—The Bangko Sentral ng Pilipinas said it did not see signs of a looming asset price bubble in the real estate sector that could destabilize the banking system, citing latest estimates showing that the exposure of banks in the property market remained within comfortable levels.

Under existing regulations, banks are supposed to limit their real estate exposure to 20 percent of their total loan portfolio.

The real estate exposure is officially defined as bank loans to property developers. However, the BSP said it was aware that there were other forms of real estate exposure of banks, including the outstanding individual housing loans extended, their total investments in securities issued by property firms and loans to socialized housing developers.

BSP Assistant Governor Ma. Cyd Tuaño-Amador said that preliminary data from banks showed that even if the other forms of exposure were taken into account, the total real estate exposure of banks would still stay within the 20-percent limit.

Using the original definition of real estate exposure, Amador said the combined exposure of banks amounted to between 15 and 16 percent of their total loan portfolios. Using the expanded definition of real estate exposure, she said the exposure would reach as much as 18 percent of the total loan portfolio of banks.

“This means that at the moment, we do not see signs of a bubble. Nonetheless, we will continue to monitor bank lending activities,” Amador told reporters Friday.

The BSP is awaiting the submission by banks of more comprehensive reports on their loans involving the real estate sector. Banks are given until the end of the year to submit the reports.

Amador said the BSP would study thoroughly the data and determine whether there was a need to update existing regulations on the real estate exposure of banks.

The official said the BSP would be ready to make adjustments in its regulations if the need for that would be established.

She said the BSP would take into account the need to prevent an asset price bubble, on one hand, and the need to meet the housing needs of many Filipinos, on the other. She noted that there remained a huge gap between housing demand and supply, with the former exceeding the latter even as the real estate sector continued to grow.

Speculations that an asset price bubble was in the offing were anchored on the significant growth of the property sector over the last three years.