Banks tighten requirements for consumer loans

MANILA, Philippines - Most banks continued to impose stricter lending standards on consumer borrowers, but kept credit guidelines for big businesses unchanged, a Bangko Sentral ng Pilipinas survey showed.

“The DI (diffusion index) approach... indicated a net tightening of credit standards for household loans owing to banks’ reduced tolerance for risk and perception of stricter financial system regulations,” according to the latest Senior Loan Officers Survey.

The quarterly Senior Bank Loan Officers Survey is conducted to enhance the BSP’s understanding of institutional lending behavior. Thirty-one banks responded to the latest survey.

“In particular, banks’ responses indicated stricter collateral requirements for all types of household loans except credit card loans and more stringent loan covenants for auto loans and personal/salary loans,” the survey said.

The survey also showed that most of the respondent banks expect to keep their current credit standards for consumers for the third quarter.

Overall credit standards for enterprises were unchanged as banks’ tolerance for risk remained steady, the central bank said.

“Overall credit standards were unchanged as banks’ tolerance for risk remained steady,” it said.

“Their outlook on the domestic economy as well as specific industries, such as real estate, renting and business activities, wholesale and retail trade, manufacturing, financial intermediation, and utilities likewise remained unchanged,” the BSP said.

The survey also showed a net increase in the demand for loans from households and enterprises.

“For loans to businesses, the net increase in loan demand was attributed by respondent banks to increased working capital needs and fixed-capital investment of borrower firms as well as lower interest rates and clients’ improved economic outlook,” the BSP said.

 “Meanwhile, the net increase in demand for household loans reflected the low interest rate environment and more attractive financing terms offered by banks,” the central bank said.

The quarterly survey has been conducted by the BSP since the second quarter of 2009 to assess credit standards, demand conditions for loans, and potential risks in asset markets.