BSP to banks: Submit stress test reports

Posted at 05/21/14 10:25 AM

MANILA - The Philippine central bank has asked lenders to assess how interest rate changes affect the real estate sector and banks' balance sheets as part of planned stress tests on the sector, its governor said on Tuesday.

The move is also part of the central bank's larger goal of keeping asset prices in check to prevent the build-up of inflationary pressures.

"They have to submit reports," Amando Tetangco, Bangko Sentral ng Pilipinas (BSP) governor, told reporters on the sidelines of a forum by Southeast Asian finance ministers in Manila.

"If the impact is significant, we may ask the bank concerned to submit a plan on how to address the impact on the balance sheet," Tetangco said.

Banks' exposure to the real estate sector at the end of last year increased by 7.1 percent against end of September to 1.006 trillion pesos ($23.06 billion), central bank data released on Monday showed. Property-related loans made up slightly more than a quarter of banks' total loan portfolio.

Monetary authorities are also looking at adjusting an existing 20 percent cap on banks' real estate exposure, to add previously excluded activities such as loans to mass housing developers and investment in property-related securities issues, said Diwa Guinigundo, BSP deputy governor.

"Continuing study is being done on whether it is time to tweak and adjust the definition to include items which were previously excluded," Guinigundo said.

Growth in the property sector is still supported by local demand for housing and an influx of foreign firms setting up back office and outsourcing operations in the country, Guinigundo added.

Earlier this month, Guinigundo said there was no evidence of asset bubbles in the property sector, and banks' exposure to the real estate market was still manageable. He also said the central bank could introduce a property sector price index to better monitor the industry.

On Monday, Tetangco said the central bank was not planning to impose more macro-prudential measures after it raised banks' reserve requirements by a total of two percentage points at its last two policy meetings.

It left its policy rate steady at a record low of 3.5 percent at its May 8 meeting, saying inflation remained in check.