PH banks start raising loan standards

Getting bank loans got tougher for both businesses and households in the first quarter of the year amid recent regulatory moves to curb excessive risk-taking, a new survey has showed.

A Bangko Sentral ng Pilipinas (BSP) survey on major banks showed businesses, regardless of size, were asked to put up more collateral to back up their loans. Maturities were also shortened for loans to reduce banks’ exposure to risks.

Consumers that sought bank loans for new car and home purchases, among others, were also subjected to tighter rules, including higher rates.

“[Results] pointed to a net tightening of overall credit standards for loans to both enterprises and households in the first quarter,” the BSP said in its Senior Loan Officers’ Survey released Friday.

The BSP said using its diffusion index, which cancels out opposing answers, 13.8 percent of banks reported that they had tightened lending standards for businesses. The index was at 5.3 percent for households.

Both results mean more banks said they would tighten loan standards than those that said otherwise.

The survey covers the country’s 36 major banks, which together corner 90 percent of the financial sector. For this quarter’s survey, 33 banks sent in answers.

For businesses, the tighter overall credit standards were attributed by respondent banks to their reduced tolerance for risk as well as perceptions of stricter financial system regulations.

In terms of specific credit standards, banks’ responses indicated stricter collateral requirements and loan covenants for all types of business loans, except micro enterprises, as well as shorter loan maturities for loans to small and medium enterprises, the BSP said.

“The tightening was observed across all firm sizes,” it added.

Findings were similar for loans to households. Banks’ responses indicated stricter collateral requirements for all types of loans extended to households and wider loan margins for housing and auto loans, the BSP said. Tighter credit standards for household loans have been noted for the sixth consecutive quarter, “owing largely to perceived stricter financial system regulations.”