The Philippine banking system showed strength, flexibility and balance amid the COVID-19 pandemic, according to Bangko Sentral ng Pilipinas Deputy Governor Chuchi Fonacier.
“It will sway back to a robust, positive trajectory once the pandemic is over,” Fonacier said, likening the BSP-supervised Philippine banking system to the resilient bamboo grass.
In a presentation on the state of the Philippine banking system at the 15th J.P. Morgan Philippine Conference on Jan. 28, 2021, the BSP official highlighted three key industry indicators where the banking system held its ground.
First, bank assets’ share to the country’s gross domestic product during the third quarter of 2020 reached a new record high of 102.2 percent.
“This means that banks have more than enough resources to support the country’s financing needs,” Fonacier explained.
A second indicator is the liquidity coverage ratio (LCR) of universal and commercial banks and their subsidiary banks and quasi-banks, which Fonacier said remained above the regulatory minimum of 100.0 percent.
She added that the minimum liquidity ratios of stand-alone thrift banks and rural and cooperative banks surpassed the 20.0 percent minimum.
Lastly, the banks’ capital adequacy ratios remained above minimum thresholds set by the BSP at 10.0 percent and the Bank for International Settlements at 8.0 percent.
Fonacier, however, pointed out that despite the continued strength of the banking system, the BSP remains vigilant of threats caused by the COVID-19 pandemic.
In particular, the banking industry’s non-performing loans (NPLs) surged by 73.6 percent as of end-November 2020 versus 27.7 percent in the same period last year. NPLs largely stemmed from loans to individuals for consumption purposes, real estate activities, and wholesale and retail trade.
“The BSP will continue to use its tools at its disposal, including the use of stress testing, scenario analysis and even the latest supervisory technology, to ascertain the true status of the financial system. This will enable us to proactively adopt or calibrate the necessary measures as warranted,” Fonacier said.
To address concerns on the banking system’s asset quality, the BSP strongly supports the enactment of the Financial Institutions Strategic Transfer (FIST) Act and the Government Financial Institutions Unified Initiatives to Distressed Enterprises for Economic Recovery (GUIDE) Act.
The FIST ACT is meant to assist financial institutions offload their debts and manage their pandemic-affected non-performing assets. Meanwhile, the GUIDE Act aims to strengthen the capacity of government financial institutions in providing the needed assistance to micro-, small and medium enterprises, and other strategically important companies.
“The challenge for all of us here today is in the manner by which we, as a community, ‘sway’ challenges into opportunities. Together, let us bring about a sound, pliable, and stable next-level financial system into the post-COVID-19 era,” Fonacier concluded.