Phillipines central bank: Lenders still stable amidst uncertainty

The BSP attributes low incidence of problem loans to the adoption of prudent lending standards.

The Bangko Sentral ng Pilipinas (BSP) stressed the local banking system remained strong as problems in the US and Europe have given rise to worries of another global financial crisis.

"The Philippine banking system remained stable during the quarter as banks continued to adhere to banking rules and regulations set by the BSP," the central bank said in its second quarter inflation report released early this week.

Credit quality continued to improve with banks’ non-performing loan ratio -- the proportion of soured loans to total loans -- registering at 2.8% as of end-May. This ratio matched the end-December 1996 ratio, which was the lowest prior to the 1997 Asian financial crisis.

"Banks’ continued adoption of prudent lending standards helped minimize the incidence of problem loans," the report read.

The local banking system’s NPL ratio was higher than Malaysia’s 2.1% and Korea’s 2.3%, but was the same as Indonesia’s and fell below Thailand’s 3.9%, the BSP pointed out.

Banks’ capital adequacy ratio of over 15% in the second quarter remained comfortably above the BSP’s 10% and the Bank for International Settlements’ (BIS) 8% minimum requirements, the BSP added, while total resources rose by 8.4% to P7 trillion as of end-April 2011 as the public continued to entrust their money to the institutions.

View the full story in Business World.