Banks relax credit standards for businesses

Banks have eased lending standards for corporations but have tightened for households, said the Bangko Sentral ng Pilipinas (BSP) on Friday, citing the results of a survey. In its Senior Bank Loan Officers’ Standards for the second quarter, the BSP noted that credit standards for loans to enterprises were relaxed but tightened in the case of households "due mainly to a decline in banks’ risk tolerance for all types of loans to consumers." There has been an increase in non-performing loans to consumers, the BSP pointed out. Banks have been more enthusiastic lending to businesses. "Expectations about general economic activity and industry-specific outlook contributed to a decline in net tightening of credit standards," the BSP said. "Credit lines were increased for top corporations and large middle market enterprises." The BSP also noted increased demand for loans by businesses and consumers during the second quarter. "Among the more important reasons for the stronger increase in net demand for loans by enterprises appeared to be their improved economic outlook going forward, lower interest rates, and improved terms of financing by banks," the central bank said. "For housing loans, the increase in net demand was likewise stronger, due mainly to strong demand for housing loans, which was consistent with improving consumer confidence." The survey consists of questions on credit standards of commercial banks, as well as factors affecting credit supply and demand for loans by both enterprises and households. The BSP started conducting the survey since the first quarter of 2009 to gauge economic activity and to help it set monetary policy. Bank lending grew by 8.1% in May year-on-year, higher than the 6.7% annual growth in April, due to a growth in loans for production activities. -- BusinessWorld