Lending norms unchanged in 4Q18

More nuanced studies by the BSP show the lending norms of the various banks in the country barely changed in the October-to-December quarter last year. contributed photo

A more nuanced approach show the various banks’ lending standards unchanged in the last quarter of 2018 as lenders maintained their credit standards for both household and enterprise loans, the Bangko Sentral ng Pilipinas (BSP) said on Friday.

This was the 39th consecutive quarter of unchanged credit standards for the majority of respondent banks surveyed since the second quarter of 2009.

“The diffusion index (DI) approach continued to indicate a net tightening of credit standards for both loans to enterprises and households. In the previous quarter, credit standards for loans to enterprises and households also showed a net tightening based on the DI approach,” the BSP said.

On lending to enterprises under the modal approach, majority of the bank respondents reaching 71.1 percent said they maintained their credit standards for the quarter while a net tightening was observed under the DI approach.

Likewise, household lending indicated some 78.6 of the bank respondents to have kept their overall credit standards unchanged while also showing net tightening for such standards under the DI approach.

According to the Central Bank, this tightening for both household and enterprise lending stemmed from the respondent banks’ perception of a stricter financial system regulations and reduced tolerance for risk.

The SLOS has been conducted by the Central Bank since 2009 in order to gain insight on banks’ lending behavior which is an important factor in gauging the country’s credit activity strength.

In addition, the survey helps the BSP assess the robustness of credit demand as well as asset markets’ conditions and the total strength of bank lending as a transmission channel of monetary policy.