The BSP said banks’ lending standards have not changed in the first quarter this year versus the previous assessment, based on its latest Senior Bank Loan Officers’ Survey (SLOS) conducted between March 2 to April 12. ManilaBulletin
The 2023 first quarter SLOS continued to indicate that banks’ overall credit standards for business and household loans are unchanged using the modal approach, one of two methods the BSP employ to review results. The other method is the diffusion index .
In the DI approach, a positive DI means banks that have tightened their credit standards exceed those that eased or “net tightening”. Meantime, a negative DI indicates there are more banks that have eased their credit standards compared to those that tightened or “net easing”. The BSP said that in the second quarter, or the months of April to June, banks seem to expect the same steady or unchanged credit standards based on the two methods due to perception of stable economic outlook, broadly steady risk tolerance, and also a stable profile of borrowers.
As for housing loans, about 58.1 percent of banks had unchanged credit standards while DI-based results showed a net tightening for residential real estate loans. This was due to: deterioration in the profitability and liquidity of banks’ portfolios; weakening profile of borrowers; and banks' reduced tolerance for risk.
“Over the next quarter, the modal approach showed a higher percentage of respondents anticipating unchanged loan standards for consumer loans. Meanwhile, the DI method reflected bank respondents' continued expectations of a net easing in household loan standards largely driven by improvements in the profitability of banks’ portfolios and banks' higher tolerance for risk,” said the BSP.
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