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The Bangko Sentral ng Pilipinas (BSP) announced on Tuesday that external loans also declined in the third quarter of the year along with loans denominated in pesos, as business activity remained tepid during the period.
Central bank data showed that outstanding loans made by banks’ Foreign Currency Deposit Units (FCDUs) stood at $ 17.3 billion in the third quarter of 2020, down 3.9 percent or $ 702 million. than the end-June 2020 level of $ 18 billion.
The BSP attributed the decline in foreign currency lending to lower working capital requirements of borrowing companies and tighter credit standards for lending banks, as less favorable economic outlook led to travel and circulation restrictions for curb the current health crisis.
Compared to 2019 levels, FCDU loans decreased by 3.1 percent or $ 554 million from the end-September 2019 level of $ 17.8 billion.
The maturity profile of the FCDU loan portfolio remained predominantly medium to long-term debt. This means that loans in foreign currency are mainly repaid over a period of more than one year. About 80 percent of total foreign currency loans in the third quarter of 2020 are medium- and long-term debt, higher than the 77.5 percent level at the end of September 2019.
The BSP data also showed that of the total loans outstanding to residents, 40.4 percent went to the following resident industries: power generation companies at 18.9 percent; exporters of merchandise and services with 14.8 percent; and utilities companies at 6.7 percent.
FCDU’s deposit liabilities stood at $ 46 billion at the end of September 2020, an increase of $ 2.4 billion from the end-June 2020 level of $ 43.6 billion.
The drop in foreign currency loans reflects credit sentiment on local bank loans.
Earlier this month, BSP Governor Benjamin E. Diokno said that banks ‘reluctance to lend and borrowers’ unwillingness to borrow is reducing the effectiveness of the BSP’s massive easing monetary policy.
Despite interest rate cuts and liquidity infusions into the economy, the latest data on domestic liquidity, measured broadly as “M3,” grew more slowly to 12.3 percent at P13.5 trillion in September. This is more tame than the 13.7 percent growth seen in the previous month.
Bank lending, which is one of the main drivers of domestic liquidity, grew 2.8 percent in September, also weaker than the 4.7 percent in August.
