BSP: Banks likely to maintain lending amid crisis

Most Philippine banks are expected to maintain their lending standards in the second quarter of 2026, signaling continued credit support for the economy even as global shocks and the ongoing energy crisis weigh on market conditions, according to the Bangko Sentral ng Pilipinas (BSP).

The central bank’s latest Senior Bank Loan Officers’ Survey (SLOS) showed that a majority of banks will keep existing credit assessment criteria for both business and household loans, suggesting stable lending conditions in the near term.

For business loans, 61.5 percent of respondent banks expect standards to remain unchanged in the second quarter, while 30.8 percent anticipate tightening and 7.7 percent expect easing. Similarly, 65.7 percent of banks said they would maintain current standards for household loans, with a smaller share signaling tighter conditions.

Despite this steady outlook, the diffusion index points to a modest net tightening of 23.1 percent for business loans and 22.9 percent for household loans, indicating a more cautious stance among lenders amid elevated risks.

The BSP said stable lending standards could help sustain credit expansion and support economic activity, even as the country navigates external pressures stemming from geopolitical tensions and rising energy costs.

The survey comes as the central bank recently rolled out regulatory relief measures to cushion borrowers and maintain liquidity in the financial system following the declaration of a national energy emergency.

Under the relief package, banks are allowed to grant loan payment grace periods of up to six months for affected borrowers, while agricultural loans may be deferred for up to one year, subject to assessment.

Loans extended under the program may also be temporarily excluded from past-due and non-performing classifications, giving banks flexibility to continue lending while supporting distressed borrowers. The BSP has also encouraged financial institutions to ease transaction costs, including waiving fees on digital banking channels, as part of a broader effort to maintain access to financial services during the crisis.

While these measures are expected to ease financial strain on households and businesses, they could also weigh on bank earnings.

S&P Global Ratings said the BSP’s regulatory relief “may undermine bank profitability as net interest margins peak and credit losses remain elevated,” noting that the suspension of loan repayments could dampen interest income.

At the same time, the ratings firm said the policy could help prevent a spike in nonperforming loans by giving borrowers breathing room to manage cash flow pressures during the crisis.

Loan demand, meanwhile, is expected to remain broadly stable. The survey said about 53.8 percent of banks see business loan demand holding steady, while 34.6 percent expect an increase. For households, 52.9 percent expect demand to remain unchanged, reflecting cautious sentiment among consumers.