Fitch Ratings on Thursday welcomed the tighter rules on real estate loans issued by the Bangko Sentral ng Pilipinas recently, as the debt watcher flagged risks from uncontrolled rapid loan growth not only to banks but also the wider economy.
In a statement, Fitch said that “recent moves to enhance oversight of property lending and project finance in the Philippines could make it easier to spot pockets of excess in these high-growth sectors.”
Fitch was referring to the recent move of the Monetary Board, the BSP’s highest policymaking body, to enhance prudential reporting requirements aimed at strengthening oversight of banks’ real estate as well as project finance exposures.
“The new ruling by the BSP targets two sectors where vulnerabilities could form amid strong loan growth. Real-estate loans, which account for just over 20 percent of total bank lending, have risen by 21 percent on average over the last four years. Meanwhile, project finance is likely to take off as the Duterte administration pushes ahead with its infrastructure investment drive,” Fitch noted.
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However, Fitch said that “prudential standards have not been tightened under the new measures and the regulator still faces the challenge of discerning unhealthy risk-taking from productive lending that supports economic growth.”
According to Fitch, “closer central bank scrutiny may make banks more cautious in lending to these sectors, but it does not amount to regulatory tightening to curb growth.”
