November 10, 2017

IMF published its staff report and selected issues report in the context of the 2017 Article IV consultation with Philippines. The Executive Directors notes the strong performance of the economy has continued, with rapid economic growth and low inflation. They also noted that the main systemic risks to financial stability are high credit growth and concentration. In addition, some conglomerates and real estate developers have leveraged significantly, while shadow-banking activities have expanded.

The staff report reveals that the banking sector in the country appears sound based on financial soundness indicators (FSIs), with ample liquidity, high capital, and low nonperforming loans (NPLs), although high credit growth needs to be closely monitored. This is because high credit growth and concentration are the key systemic risks to financial stability. Capital market development can help reduce bank loan concentration by diversifying the sources of funding for large conglomerates. FSIs also indicate pockets of vulnerability in the non-financial corporate sector. Although the share of non-financial corporate sector debt at risk is among the lowest in emerging market economies, some real estate developers have leveraged significantly, while expanding shadow banking activities through their acceptance of advances from households. Furthermore, the authorities are tightening anti-money laundering (AML) legislation, in line with the Financial Action Task Force standards.

Staff recommends the use of macro-prudential policies to address the systemic risks to financial stability. Targeted macro-prudential policies should be used in case of excessive credit growth to some sectors. Additionally, staff welcomes the early adoption of Basel III guidelines and the role of the new financial stability department at BSP, which is the central bank of Philippines. BSP is entrusted with mainstreaming macro-financial surveillance and strengthening the macro-prudential framework. The authorities broadly agreed with the assessment of systemic risks and policies to address them. Stress test results show that banks are resilient to a 20% write-off on their exposure to the top 20 conglomerates. Moreover, staff encouraged the authorities to consider introducing stress tests on debt-to-earnings ratios for corporates and developing a borrowers’ interconnectedness index. 

The selected issues report analyzes the spillover effects from US policy shifts and lower growth in China. The report also discusses the fiscal responsibility law and how Philippines would benefit from it, enshrining explicit fiscal rules with countercyclical elements and an independent fiscal council to improve accountability and transparency. 

 

Related Links

Keywords: Asia Pacific, Philippines, Banking, Article IV, Systemic Risk, Shadow Banking, Stress Testing, FSI, IMF

Related Articles
News

EC Amends Regulation Supplementing Solvency II Directive

EC published the Delegated Regulation (EU) 2019/981 that amends the Regulation (EU) 2015/35, which supplements Solvency II Directive (2009/138/EC) on the taking-up and pursuit of the business of insurance and reinsurance.

June 18, 2019 WebPage Regulatory News
News

IOSCO Report Examines Application of International Cyber Standards

IOSCO published a final report that examines the application of the three internationally recognized cyber standards and frameworks by IOSCO member jurisdictions.

June 18, 2019 WebPage Regulatory News
News

PRA Launches 2019 Stress Test Exercise for Life and General Insurers

PRA has launched the biennial insurance stress test and is asking the largest regulated life and general insurers to provide information about the impact of a range of stress tests on their business.

June 18, 2019 WebPage Regulatory News
News

PRA Finalizes Reporting Amendments to Pillar 2 Liquidity Framework

PRA published the final Policy Statement PS13/19 on regulatory reporting amendments and clarifications to the Pillar 2 liquidity framework for banks in UK.

June 17, 2019 WebPage Regulatory News
News

FSB Assesses Implementation of Compensation Standards and Principles

FSB published the sixth progress report on the implementation of its principles and standards for sound compensation practices in financial institutions.

June 17, 2019 WebPage Regulatory News
News

IMF Publishes Reports on 2019 Article IV Consultation with Ireland

IMF published its staff report and selected issues report under the 2019 Article IV consultation with Ireland.

June 17, 2019 WebPage Regulatory News
News

EBA Updates Data on Deposit Guarantee Schemes in EU

EBA published the 2018 data on two key concepts in the Deposit Guarantee Schemes Directive (DGSD)—namely, available financial means and covered deposits.

June 17, 2019 WebPage Regulatory News
News

SNB Updates Form for Reporting Solvency Risk of Counterparties

SNB published the survey (Form Release 5.01) and related documentation for reporting solvency risk of counterparties in the interbank sector (ARIS).

June 17, 2019 WebPage Regulatory News
News

ISDA Studies Variation in Global Implementation of Margin Requirements

ISDA published a paper that highlights the main areas of difference in the implementation of margin requirements for non-cleared derivatives across jurisdictions and makes recommendations on how to resolve these variations.

June 17, 2019 WebPage Regulatory News
News

US Agencies Finalize Rule to Streamline Reporting for Small Banks

US Agencies (FDIC, FED, and OCC) adopted a final rule to streamline the regulatory reporting requirements for small institutions.

June 17, 2019 WebPage Regulatory News
RESULTS 1 - 10 OF 3265