Banks Implement Tighter Credit Standard

With the coronavirus disease 2019 (COVID-19) pandemic still present, banks are now pushing for tighter credit standards as company loan demands are rising while retail borrowers are decreasing.

According to the Banko Sentral ng Pilipinas (BSP), a survey showed that most banks implemented tighter lending primarily because of borrower’s decline expectancy and bank portfolio profitability, and banks’ reduced tolerance for risk.

Meanwhile, bank respondents revealed that “tighter” overall credit standards are being pushed for household loans since there is an uncertain economic outlook. Household loans might be the focus of a more cautious lending transactions.

“Results based on the diffusion index approach suggested expectations of a net increase in overall demand for business loans, associated largely with corporate clients’ higher working capital requirements,” BSP said in a statement.

Despite the challenges, banks see a strong overall loan demands from enterprise and even households in the fourth quarter.

Real estate loan will also be a subject for tighter lending on the fourth quarter of 2020. (MLC)