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December 10, 2023

S&P Global’s Economic Risk Review: Philippines shows high resilience and low economic imbalances

Banks in the Asia Pacific region are well-positioned to withstand any potential contagion stemming from the collapse of US bank Silicon Valley Bank (SVB), according to S&P Global.

A report released by the global credit rating agency, said that most financial institutions in the region were able to weather the global financial crisis and the European sovereign debt crisis, and a similar outcome is anticipated from the SVB failure, which is considered to be a much smaller contagion event.

S&P Global’s key banking sector analysis reveals that the Philippines has a “stable” assessment in terms of economic risk trend and industry risk trend. The country’s ability to handle system risks under S&P’s “Banking Industry Country Risk Assessment” report remains at level “5”, a classification that is deemed satisfactory by the Bangko Sentral ng Pilipinas (BSP).

The Philippines exhibits “very high” economic resilience risk and “high” credit risk in the economy, but it also boasts a “low” risk of economic imbalances, according to S&P Global’s economic risk review.

In terms of industry risk, the Philippines faces “high” institutional framework risk, while the risk for competitive dynamics and system-wide funding is assessed as “intermediate” risk factors.

S&P analysts have observed that Philippine banks mostly hold investment securities issued by the government, with approximately one-third of their books being domestic bonds.

In contrast, SVB has 40 percent to 55 percent of its balance sheets invested in available-for-sale and held-to-maturity portfolios.

Philippine banks divested some of their investment securities before 2022, resulting in decreased holdings.

On average, investment securities comprise about 15 percent to 20 percent of local banks’ books.


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