Foreign currency deposit unit (FCDU) loans declined by 5.0 percent to $15.13 billion in the third quarter of 2025, down by $802.09 million from $15.93 billion in the previous quarter, the Bangko Sentral ng Pilipinas (BSP) reported on Monday.

FCDU loans are borrowings denominated in foreign currencies — such as the US dollar, euro, or yen — extended by Philippine banks through their respective foreign currency deposit units. These special banking units are authorized to accept and deploy foreign-currency deposits.

In practical terms, FCDU loans allow borrowers to raise funds directly in foreign currency rather than pesos. They are commonly used by exporters, importers, infrastructure developers, and firms with foreign-currency earnings, as repayment aligns with their dollar or foreign-currency income streams.

FCDU loans typically carry lower interest rates than peso-denominated loans, reflecting global benchmark rates. They are widely used to finance trade, large capital expenditures, and foreign-assisted infrastructure projects.

The BSP said that of the total outstanding FCDU loans, $9.59 billion, or 63.4 percent, were extended to Philippine-based borrowers, while the remainder went to non-residents.

FCDU lending plays a key role in integrating the Philippine economy into global capital markets, lowering financing costs for internationally oriented firms, and supporting large-scale investments. However, it also introduces foreign-exchange risk: borrowers earning primarily in pesos but servicing dollar-denominated debt may face sharply higher repayment costs when the peso depreciates.

For this reason, the BSP closely regulates and monitors FCDU lending as a potential source of financial stability risk, particularly during periods of heightened currency volatility.