Bangko Sentral allows big banks to grant more property loans

Metro Manila (CNN Philippines, August 20) — The Bangko Sentral ng Pilipinas has authorized big banks to extend even more property loans to borrowers.

BSP Governor Benjamin Diokno said Thursday that the Monetary Board approved a measure raising the allowed real estate loan limit for universal and commercial banks to 25 percent, higher than the long-standing 20 percent ceiling.

“The increase translates to additional liquidity for real estate lending amounting to around ₱1.2 trillion based on end March 2020 numbers,” Diokno told reporters.

The loan exposure limit seeks to protect banks from the volatilities of real estate, which sometimes sees a spike or dip in property prices. It’s a precautionary measure to prevent asset bubbles — or when there’s a mismatch in supply and demand for housing units — which triggered the 1997 and 2008 global financial crises.

Banks and their trust departments had a ₱2.49 trillion exposure to the property sector as of 2019, the bulk of which was through loans worth ₱2.17 trillion. The remaining amount represents bets made on real estate investments.

Of the loans, ₱1.4 trillion was borrowed for commercial space while ₱764 billion was secured for residential units. The loans accounted for 19.84 percent of the banks’ total loan books, hovering close to the old ceiling.

Soured loans, or those left unpaid for at least 30 days past due date, amounted to ₱37.3 billion or 1.72 percent of total bank loans as of December. This is deemed low, but could rise following the economic impact of lockdowns this year due to the COVID-19 pandemic.

Banks have given suspended mortgage collections during the lockdown period and gave grace periods for borrowers to settle their dues.

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Article and Photo originally posted by CNN last August 20, 2020 11:03am and written by Melissa Luz Lopez.