BSP to prioritize financial stability as pandemic continues

THE CENTRAL BANK will prioritize financial stability as the coronavirus pandemic stretches on, Bangko Sentral ng Pilipinas Governor Benjamin E. Diokno said on Friday.

“Supervisory priority areas moving forward include monitoring of asset quality, declining profitability, liquidity and capital positions,” Mr. Diokno said in his speech at the virtual induction ceremony of the Financial Executives of the Philippines (FINEX).

The central bank chief said the banking system remains “stable, sound, resilient and inclusive” and will continue being so in the next years despite the risks caused by the pandemic.

The capital adequacy ratio of big banks is currently around the 15-16% level, above the minimum thresholds of 10% and eight percent set by the BSP and the Bank of International Settlements, respectively.

Meanwhile, the industry’s non-performing loan ratio stood at 3.81% at end-November 2020. The BSP said this could have 4.6% at end-2020, still better than the 17.6% seen in 2002 as a consequence of the Asian Financial Crisis.

“At the onset of the pandemic, the banking system had significant capital and liquidity buffers built up due to both regulatory requirements and several years of favorable banking conditions,” Mr. Diokno said.

“The result of our stress tests suggests that banks can continue to lend and prosper through a broad range of adverse scenarios,” he added.

Meanwhile, Mr. Diokno said annualized bank lending rates have been declining, particularly the lower loan limit.

In his presentation at the event, he said P143.8 billion in loans to micro-, small, and medium-sized enterprises were used by banks as alternate reserve compliance as of the reserve week ending Dec. 17. — LWTN