Banking regulators on Friday moved to reassure the public about the strength of the financial system after the bankruptcy of a Korean-owned shipbuilder in Subic Bay triggered a $412-million default on local lenders — the biggest in Philippine corporate history.
In a statement to the Inquirer, the Bangko Sentral ng Pilipinas said the banking industry has enough capital buffer to weather the sudden collapse of Hanjin Heavy Industries and Construction Philippines, which operates a $1.6-billion shipyard in Zambales employing 23,000 workers.
Notably, BSP Deputy Governor Diwa Guinigundo refrained from commenting on the financial health of the individual banks with large loan exposures to Hanjin, saying it would be “premature” for the regulator to comment on a matter that is pending in the judiciary, referring to the corporate rehabilitation petition Hanjin filed on Jan. 8 with the Olongapo Regional Trial Court.
Guinigundo assured the public, however, that the combined loan amount — worth P21.6 billion at the prevailing exchange rates — is “negligible” based on the central bank’s “initial assessment” relative to both total loans and total dollar loans in the banking system.
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“Our banks as a whole are very strong and more than adequately capitalized, their assets continue to grow and the quality of their loans based on nonperforming loan ratio is less than 2 percent,” he said in a text message on Friday morning.
As the shipbuilder defaulted on its obligations, the concerned financial institutions—Rizal Commercial Banking Corp.; Land Bank of the Philippines; Metropolitan Bank and Trust Co.; Bank of the Philippine Islands, and Banco de Oro Universal Bank— decided to move to take control of the firm, while agreeing among themselves to act collectively to preserve the firm’s assets.
