Expected increase in bad loans ‘manageable,’ says BSP chief

The country’s financial system can withstand the expected rise of “bad loans” or those which are failed to be settled by borrowers after due date amid the COVID-19 pandemic, the Philippines’ central bank chief said Friday.

Citing a survey of top 20 commercial and universal banks and top 20 thrift and rural banks, Bangko Sentral ng Pilipinas Governor Benjamin Diokno said lenders are expecting their non-performing loans (NPLs) to increase from 2.4% as of April to 4.6% by December.

“That’s really manageable. Noong Asian Financial crisis umabot ng 20% ang non-performing loans,” Diokno said in an interview on Dobol B sa News TV.

“In general, maganda ang kondisyon ng mga bangko. Natuto na tayo noong Asian financial crisis... Right now, our banking system is financially able to withstand this higher non-performing loans,” he noted.

The BSP chief said the central bank is requiring banks to have adequate capital.

Several lenders have also announced the allocation of billions of pesos for expected credit loss provisions.

Diokno also noted that the economy is showing signs of recovery after two straight quarters of contraction, citing manufacturing and trade figures.

Latest available data from the Philippine Statistics Authority showed that manufacturing and trade are beginning to show signs of recovery.

The volume of production index was -39% in April but improved to -19% by June.

Likewise, exports improved from -50% in April to -13% June.

Imports, which support both household consumption and business investment, also recovered gradually from a large contraction of -65% in April to a slower contraction of -25% in June.—AOL, GMA News