IMF soothes POGO scare

In its recent assessment of the Philippine situation, the International Monetary Fund (IMF) stated that fears regarding the effects of the Philippine Offshore Gaming Operations (POGO) ban on the property sector are overstated.

The IMF noted that vulnerabilities in the real estate market are limited, citing the effectiveness of existing prudential measures in managing bank exposures to the sector, as well as the active monitoring of the situation.

The Bangko Sentral ng Pilipinas (BSP) similarly observed that vacancies created by the exiting POGOs are likely to be absorbed by traditional residents, with developers possessing the flexibility to adjust project completion timelines.

The IMF also dismissed fears of a potential bubble, stating that the quality of loans exposed to the sector is satisfactory and supported by a high non-performing loan coverage ratio. Banks were also found to have sufficient capital buffers to withstand a material downturn in the property sector, as confirmed by the BSP’s real estate stress tests.

The IMF emphasized that before progressing toward a positive neutral countercyclical capital buffer, a decision framework should first be established, noting that the current high capital buffers in the banking system are adequate for the interim.

Legislative proposals are expected to be submitted by mid-2025 to develop an effective resolution framework, while the BSP facilitates the establishment of a resolution unit. The government is also working to address challenges in obtaining data on conglomerates for supervision.

Two state-owned banks, the Development Bank of the Philippines and the Land Bank of the Philippines, continue to meet capital requirements well above the regulatory minimum. Both are pursuing capital-management strategies, including the potential non-payment of dividends to the national government, to strengthen their capital positions.

Authorities remain optimistic about the Philippines exiting the Financial Action Task Force (FATF) grey list by February 2025, following an FATF onsite visit in January.

The IMF recognized the country’s commitment to meeting evolving FATF requirements, noting preparations for the next mutual evaluation scheduled for 2027.