By LEE C. CHIPONGIAN
October 3, 2011, 2:08am
MANILA, Philippines — The central bank thinks the banking sectors'
lending activities are still moderate, that the room for growth is
enormous but then this potential for expanding loan exposures is being
approached rather tentatively.
Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. said
the industry's intermediation or making available funding and finances
to businesses, corporations and individuals could still improve, or grow
higher than the current pace of growth. At the end of July, bank lending
increased 19.1 percent year-on-year, the highest since April 2009.
"Economic growth is helped by the (financing) intermediation done by
banks but there is room for additional lending by banks which would help
the economy to grow more," Tetangco told participants of the mid-year
Philippine investor relations briefing last Friday.
Bank of the Philippine Islands President Aurelio Montinola III, also
head of the Bankers Association of the Philippines, also noted that at a
19-percent growth level, bank lending is about four percent vis-à-vis
the size of the economy as measured by gross domestic product.
Montinola said the loans sector has improved and continues to enhance
lending services. "In the past you have SMEs complaining that they are
not receiving the funding but now they're happy especially since they
are getting low borrowing rates."
Montinola, however, said that banks have much more to do to grow the
business since only 25 percent of the total population has, in one form
or another, some banking transactions such as deposits, loans or tapping
remittance services. Still, he said the loans-to-deposit ratio is on the
low side.
To some extent, he said the BSP has done its job of encouraging lending
growth and the business of banking generally. "We have been aided by
infrastructure related additions to the single borrowers' limit, branch
banking liberalization, a broadened foreign currency investment
capability for thrift banks, and most of all financially inclusive
initiatives in the SME and micro finance sphere," Montinola said.
The BSP has long suspected that a higher bank lending growth may be
restricted by the less risky and costly alternative of parking bank
funds with the central bank through open market instruments such as
special deposit accounts (SDAs).
But according to a continuing BSP study, SDA placements, which as of the
second week of September have reached P1.65 trillion from P1.23 trillion
at the end of 2010, actually do not hinder the growth of bank lending.
The study noted that there are no concrete conclusions yet but the
initial findings show that SDAs continue to be effective in managing
domestic liquidity. It has become one of the BSP's key monetary policy
tools, despite it being a liability, and so far it has been effective in
dealing with liquidity concerns, such as rapid flow of capital into the
country.
Still, BSP is concerned that bank lending are still being affected by
SDAs and they want to eliminate suspicions that SDAs are limiting bank
lending growth. An official source said the aim is to establish the
relationship between SDA placements and bank lending activities.
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