Limited local risk from US subprime woes: central bank

MANILA (AFP) - Philippine banks have limited exposure in the US subprime lending crisis and any effects on the domestic financial system will be limited, central bank governor Amando Tetangco said Friday.

Local banks have no significant exposure to collateralized debt obligations (CDOs), which are at the heart of the US credit problems, and any impact on the Philippine economy "will be largely indirect, mainly in the form of risk aversion," Tetangco told reporters.

"It is expected to be limited. Philippine banks are not exposed in any significant way to CDOs," he added.

The instruments are securities backed by bonds and loans which could in turn include US subprime mortgages.

"There is sufficient liquidity. More fundamentally, the increased availability of longer-term funding in pesos has also reduced the country's vulnerability to adverse external market developments," the central bank governor said.

Philippine equities closed three percent lower Friday following another major slump in markets worldwide after BNP Paribas, France's biggest bank, froze withdrawals from three of its funds that had invested in subprime mortgages in the United States.

The peso fell to 45.73 against the dollar from 45.36 on Thursday afternoon.