BSP considers changes to real estate financing

The Philippine central bank is considering changes to guidelines for real estate lending to avoid an asset-price bubble in the property market, Governor Amando Tetangco said yesterday,after data showed a rise in activity.
Tetangco said Bangko Sentral ng Pilipinas’s (BSP) monitoring of banks’ exposure to the property market confirmed an increase in activity, although growth in real estate loans remained consistent with overall credit expansion.

Late last year, the central bank asked banks to provide more information on their real estate-related lending and investments. Data suggest that the non-performing real estate loan ratio for banks as a whole continues to be “stable.”

“Despite such front-line indicators, however, the BSP will be studying possible policy adjustments that may be warranted, both on a per institution basis, and across the system as a whole,” Tetangco told Reuters through email.

“We are not yet ready to announce the exact form of such adjustments but we will certainly do so as soon as we firm these up,” he said.

Tetangco also said the central bank was closely monitoring banks’ credit underwriting standards to ensure that “standards have not been sacrificed in order to help real estate developers move their growing inventory.”

At present, banks are allowed to lend only up to 20 percent of their total loan portfolio to the property sector, and the central bank has previously said the ceiling is being reviewed.

Banks’ exposure to the sector reached 561.6 billion pesos ($13.73 billion) at the end of June 2012, up almost 19 percent from a year ago, according to the latest central bank data.

source:  Malaya