The banking sector has largely maintained its lending standards for business and household loans in the third quarter, according to a survey released by the Bangko Sentral ng Pilipinas (BSP).
While most banks reported no changes in credit standards using the modal approach, the diffusion index (DI) method revealed a net tightening for both types of loans. The DI assesses the balance between banks tightening and easing their standards, with a positive DI indicating that more banks are tightening.
For business loans, 80.4% of banks reported no change in credit standards, down from 87% in the previous quarter. However, the DI showed ongoing net tightening, primarily due to concerns about deteriorating borrower profiles and challenges within banks’ portfolios.
Looking ahead to the fourth quarter, around 90.2% of banks expect to maintain their credit standards for business loans. Nonetheless, the DI remains positive, suggesting further tightening due to concerns over borrower profiles, bank profitability, liquidity, and stricter regulations.
Regarding household loans, 80% of banks reported no changes in credit standards using the modal approach, a decrease from 84.2% in the previous survey. The DI also indicated net tightening for household loans, driven by similar concerns about borrower profiles and banks’ risk tolerance.
