‘No need for asset bubble measures’

MANILA, Philippines - Measures to temper the real estate boom on fears of asset bubbles are not being considered, with the central bank wanting a closer look on where funds on the sector are going, officials said.

“We are now analyzing the reports and we will see if there is going to be a need to adopt measures. But at this point in time, we do not see the need for that,” Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. told reporters late Monday.

The BSP is using its latest data on banks’ real estate exposure as “basis” to determine the “types of exposures” lenders have, BSP managing director Johnny Noe Ravalo said yesterday.

In 2012, property exposure of banks – measured through the proportion of real estate loans to total loan portfolio – hit 20.86 percent, breaching the 20-percent regulatory cap instituted after the 1997 Asian financial crisis.

The breach followed the removal of several exemptions to the original computation. Under the present formula, exclusion granted to low-cost housing and guaranteed loans were scrapped, while investments to securities were included.

The revision in the calculations, the central bank said, was meant to give policymakers a clear picture of how much banks are lending to the real estate sector on fears of asset bubbles.

Bubbles are formed because of huge demand but what is being prevented is the bursting of the bubble that emanates from defaults on loans used to buy real properties.

“We are trying to determine the supply and demand dynamics governing the loans,” Ravalo pointed out.

In the process, the central bank wants property loans broken down into different market segments namely condominiums, low-cost housing and “other” segments such as property security placements.

Ravalo said regulators have began asking banks and government agencies, such as the Housing and Development Coordinating Council for data, but the problem is they are using different definitions for each segments.

“We want to have a clear picture of the landscape. To be able to do that, we made up tentative sort of definitions (for the segments),” he explained.

“It is a continuing process,” Ravalo said, adding that reports will be available within the year.

In addition, study on possible re-calibration of property exposure, from total loan portfolio to bank capital, is also ongoing.

“As far as (BSP) is concerned, we can always make the alignment of what is plus and minus (to the computation) for as long as the yardstick is clear,” Ravalo said.

For Tetangco, present demand for real estate is backed by “fundamental support” of a growing economy that increases salaries and wages. A “significant backlog” of four million units in the socialized housing is also a reason.