WHILE local loans managed to climb to the growth territory in August, Bangko Sentral ng Pilipinas (BSP) data showed that dollar loans extended by banks still contracted in the second quarter of the year.
BSP Governor Benjamin Diokno reported that as of end-June this year, outstanding loans granted by Foreign Currency Deposit Units (FCDU) of banks stood at $16.2 billion. This is lower by $170 million—or by 1 percent—than the end-March 2021 level of $16.3 billion as principal repayments exceeded disbursements.
FCDUs refer to a unit of a local bank or a branch of a foreign bank authorized by the BSP to accept deposits in non-peso denomination. This is pursuant to Republic Act 6426 or the Foreign Currency Deposit Act of the Philippines, as amended.
As of end-May 2021, a total of 76 BSP-supervised entities are allowed to engage in FCDU activities. These include 46 universal and commercial banks, 21 thrift banks, and 9 rural and cooperative banks.
The BSP said the decline in FCDU loans may be attributed to lender banks’ tighter credit standards, which resulted in a slowdown in their lending operations and credit activity.
The borrowers’ reduced working capital and funding requirements relative to pre-pandemic levels amid economic slowdown and availability of other sources of funding may also have contributed to the decline.
The maturity profile of the FCDU loan portfolio during the period remained predominantly medium- to long-term debt. These are debts payable over a term of more than one year. Medium- to long-term debt represented 78.9 percent of total loans during the period, lower than the 79.9 percent level as of end-June last year.
Of the total 67.1 percent outstanding loans to residents, 40.2 percent went to the following resident industries: power generation companies at 17.7 percent; merchandise and service exporters at 14.6 percent; and public utility firms at 7.9 percent.
Gross disbursements in the second quarter of 2021 reached $14.1 billion, 11 percent lower than the previous quarter’s figure. The BSP said this is mainly due to the decrease in funding requirements of an affiliate of a branch of a foreign bank.
Similarly, loan repayments were lower by 11.6 percent.