Banks’ lending rules to stay relatively liberal

CASH is seen to remain cheap in the coming year as banks stay relatively liberal in lending, with the financial system still awash in liquidity, in line with the needs of the country’s growing economy.

Bangko Sentral ng Pilipinas Governor Amando M. Tetangco Jr. said authorities were ready to act in case tighter lending standards would threaten to hinder the country’s performance.

“I think lending growth would continue to ensure that there’s sufficient support,” Tetangco said. “We’re monitoring this of course, and if we see there is some tightness … we can review [our policies],” he told reporters.

This follows the release of data last week that showed lending growth moderating to its slowest point in a year, indicating that banks had become more selective with borrowers. This also reflects the effects of recent moves of the central bank to keep banks from taking excessive risks.

Inclusive of placements with the BSP, loans extended by universal and commercial banks grew by 16.8 percent in December of 2014, slower than the 20.1-percent expansion recorded at the end of November.

Money supply growth also remained subdued at 9.6 percent in December from 9.2 percent the month before.

The BSP’s main goal is keeping consumer prices stable by controlling the amount of money circulating in the economy, and influencing its cost in the form of bank lending rates.

These functions however, also have an implication on economic growth—too much tightening can stunt growth. Although this concern is not on top of the list of the central bank’s priorities, it comes in at a close second.

According to Tetangco, there is still enough money to go around in the economy to ensure that business activity runs smoothly. This was despite interest rate hikes last year which sought to slow down money supply growth.

More targeted measures like stress tests for banks’ real estate portfolios were also implemented last year. Tetangco said that while these might slow lending to fund the construction of new homes and offices, a debilitating credit crunch was unlikely.

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