PHL banks tighten credit standards amid economic slowdown

Philippine banks have tightened credit standards for companies following the first-quarter slowdown in the country’s economy, the Bangko Sentral ng Pilipinas (BSP) has reported in a second-quarter survey. The Q2 2011 Senior Bank Loan Officers’ Survey showed an overall net tightening of credit standards for loans to enterprises, as well as an overall net easing of standards for household borrowers, said Jasmine Dacio, BSP economic research officer, in an interview with reporters Tuesday. “This reflected the banks' less optimistic outlook on the economy and certain industries. Banks' reduced tolerance for risk and access to market financing also contributed to the net tightening of credit standards to enterprises in the second quarter," Dacio explained. Results of the second-quarter BSP Business Expectation Survey showed a positive yet less buoyant business confidence index in relation to the first quarter, she said. Dacio said this happened on account of rising global commodity prices and adverse external developments. The survey showed a 5.6-percent increase in net tightening of credit standards for loans, and a 7.1-percent increase in the same aspect in large middle-market enterprises, and an 8.3-percent increase in small- and medium-sized enterprises. Dacio, however, said credit standards for loans to top corporations remained unchanged since the first quarter, while credit standards for loans to micro enterprises have remained unchanged for the fourth consecutive quarter. Loan maturities for large middle-market enterprises, in terms of specific credit standards, have meanwhile appeared to be shortened. Standards on collateral requirements and loan covenants were, however, eased. Banks’ standards on loan margins and sizes of credit lines have been eased for most firm sizes, the bank official added. “Survey results have been showing a net narrowing of loan margins since the fourth quarter of 2010 while credit line sizes have been exhibiting a net increase since the second quarter of 2010 particularly for top corporations and large middle-market enterprises," Dacio said. — PE/VS, GMA News