Amendment to banks’ credit, risk-taking rules not to result in excessive property price hikes

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MANILA — Affordability of housing units in the Philippines is not expected to rise vis-à-vis the amendments on banks’ credit-risk taking.

Philippine Savings Bank (PSBank) President Vicente R. Cuna, Jr. said the amendments, which includes the decrease of the maximum loan value of real estate being used as loan collateral from 80 percent to 60 percent, is not a big issue.

He said that the amendments “are really meant for the BSP (Bangko Sentral ng Pilipinas) to be ahead of the curve.”

He said banks continue to lend to the real estate sector as well as individuals applying for mortgage loans even after the amendments of regulations on credit and risk-taking.

He said banks are still allowed to consider 80 percent of the collateral as loan value but at their expense.

“This brings back to the point of the BSP that they’re not curtailing lending to real estate but they want banks who do (lending business) to be properly capitalized. Nothing’s wrong with that,” he said.

”It’s really all a pro-active stance. I don’t think it will affect affordability,” he said.

Earlier, BSP Governor Amando Tetangco Jr. said there was a need to lower the weight of collateral on loans to check on the financial institutions’ credit risk management quality and to align the rules with international standards.

“Rather than promoting mere compliance with detailed regulations, the focus will be on assessing the quality of the internal credit environment from end-to-end,” he said

Tetangco said “prudent lending should be primarily based on solid analysis of creditworthiness and quality of cash flows.”

He also said that “by discouraging obsession with collateral, the new regulations promote better access to credit by those who are not necessarily collateral heavy but do have the ability to pay from business operations or other regular cash flows.”