PHL financial system ‘resilient’ amid offshore bank issues

THE Philippine financial system remains resilient despite issues affecting the global banking sector, the World Bank said.

“The financial system remains resilient, as banks are overall well-capitalized, with sufficient capital and liquidity buffers, and no material exposure to recently failed banking institutions,” it said in its Philippines Monthly Economic Developments report.

Financial markets across the globe were sent on edge after the collapse of the Silicon Valley Bank and Signature Bank in the United States, which marked one of the biggest banking failures since the financial crisis in 2008.

A crisis of confidence also hit Credit Suisse, which resulted in a state-led rescue by its Swiss rival UBS Group.

The World Bank said that the Philippine financial sector’s resilience comes from its improved asset quality, as its nonperforming loan (NPL) ratio has returned to pre-pandemic levels.

Data from the central bank showed the banking industry’s gross nonperforming loan ratio increased to 3.31% in February from 3.28% in January.

However, it was lower compared with the 4.24% print in February 2022.

Total NPLs, which are unpaid loans for more than 90 days, fell by 13% year on year to P411.19 billion as of end-February from P472.66 billion in the comparable year-ago period.

Bank profitability has also continued to show “considerable improvement,” the World Bank said.

“As of the fourth quarter, return on assets, return on equity, and net interest margin were higher than their pre-pandemic levels. The system-wide liquidity of the banking sector remains broadly adequate,” the lender said.

Bangko Sentral ng Pilipinas (BSP) Governor Felipe M. Medalla previously said that Philippine banks do not have exposure to the US banks that failed.

Mr. Medalla said this was due to banks’ foreign currency deposit units’ assets being mostly loans and Philippine dollar bonds and sovereign bonds of countries with high credit ratings.

The BSP also earlier said that it is “prepared to withstand possible shocks.”

The central bank said it has implemented structural reforms, such as the adoption of risk management standards and prudential limits and requirements and strengthened its surveillance mechanisms and coordination efforts to ensure the safety of banks. — L.M.J.C. Jocson