PH financial system was up to pandemic’s challenge in H1 — BSP

MANILA, Philippines – The Philippine banking system remained “relatively sound and stable” and continued to supply the liquidity needs of the domestic economy in the first half of the year, despite the crippling economic effects of the coronavirus pandemic.

Thus said Bangko Sentral ng Pilipinas Governor Benjamin Diokno who described the country’s financial infrastructure as having entered the Covi-19 public health crisis “in a position of strength” and has become stronger since.

“Despite the immense economic disruption following the outbreak of COVID-19, decisive, time-bound and wide-ranging policy responses have helped to prevent a seizing-up of the banking system,” he said in a statement on Thursday.

The central bank chief added that the impact of the pandemic on the overall condition and performance of the banking system — which remains the core of the domestic financial system — has been “manageable.”

The imposition of the Enhanced Community Quarantine lockdown earlier this year prompted banks to adjust their daily operations while the slowdown in economic activities affected their borrowers’ capacity to pay.

However, with the issuance of BSP monetary and regulatory relief measures, the banking system managed to post growth in assets, loans, deposits, profitability, as well as stable capital and liquidity buffers.

“During the first semester of 2020, the total assets, loans and deposits of both the universal and commercial banking, and rural and cooperative banking industries, registered growth while that of the thrift banking industry declined, largely driven by the consolidation of subsidiary thrift banks with their parent banks,” he said.

Meanwhile, financial soundness indicators, which assessed the banking system’s strengths and weaknesses, affirmed that the banking system was resilient during the first half of the year.

But the same financial soundness analysis indicated that consequent risks from lending should be monitored moving forward especially in the event of excessive uncertainties that could place additional pressures on the banking system.

Diokno also described as “a bright spot” the fact that the pandemic accelerated the digital transformation of the banking system through the increased usage of digital financial platforms.

This was driven by the opening of around 4.1 million digital accounts among banks and non-bank electronic money issuers and significant increase in InstaPay and PesoNet transactions during the lockdown period.

The financial system report also highlighted that foreign currency deposit system, trust entities, foreign banks in the country, quasi-banks and other non-bank financial institutions all showed positive performance during the review period.

Meanwhile, the section on pawnshops and money service businesses highlighted their role as critical access points for the improved service delivery of the financial system.