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Philippine banks' credit risk trend improving – S&P

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Philippine banks have carved an improving trend in terms of credit risks, according to the latest Banking Industry Country Risk Assessment: Philippines (BICRA) report of Standard and Poor's Global Ratings (S&P).

"We believe the trend in economic risks facing financial institutions operating in the Philippines has become positive, based on improving credit fundamentals," the credit watchdog said in statement accompanying the report.

S&P noted that banks have religiously been lending to companies. "Philippine banks predominantly lend to the corporate segment, particularly larger companies with long credit histories and a strong repayment track record."

The establishment of the government-led Credit Information Corp. (CIC), scheduled to launch early 2018, is expected to benefit consumer lending in the country.

The credit registry database will aggregate data and consolidate reports from other credit bureaus.

"In particular, we believe the credit bureau will help improve transparency and availability of borrower information on the household sector, which forms a significant 18 percent of lending by the banking sector and has historically contributed materially to credit losses," it said.

"We expect the upcoming launch of CIC's database to improve information availability and assist banks to make better lending decisions as they refine their risk management," it added.

S&P said it could revise its economic risk assessment of the Philippines when such developments start to materialize.

"If the abovementioned economic trend improvement materializes, we could revise our economic risk assessments to a stronger category of '6'," it said. — Jon Viktor Cabuenas/VDS, GMA News

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