Debt watcher Fitch Ratings said Thursday the recent moves of Bangko Sentral ng Pilipinas to enhance oversight of property lending and project finance may help detect risks that could arise from sustained rapid loan growth.
“Nevertheless, prudential standards have not been tightened under the new measures and the regulator still faces the challenge of discerning unhealthy risk-taking from productive lending that supports economic growth,” Fitch said in a report Thursday.
“Sustained rapid loan growth could create risks to the banking sector and the broader economy if left unchecked,” it said.
The new BSP ruling targets two sectors where vulnerabilities could form amid strong loan growth. These are real estate and project finance. Real-estate loans, which account for just over 20 percent of total bank lending, have risen 21 percent on average over the last four years.
Meanwhile, project finance is likely to take off as the Duterte administration pushes ahead with its infrastructure investment drive under the ambitious “Build, Build, Build” program.