Amid inflationary pressures and high interest rates, the total resources of the country’s financial system continued to grow by 6.98 percent to P29.079 trillion as of end-August this year from P27.181 trillion same time in 2022, according to the Bangko Sentral ng Pilipinas (BSP).
Financial system resources are held by banks and non-banking financial institutions (NBFIs). These funds and assets are in the form of deposits, capital, and bonds or debt securities.
By banking group, the big banks or the universal and commercial banks had the largest share of assets at 94 percent.
Banks accounted for P24.046 trillion of total resources, up by 7.95 percent from same time last year of P22.276 trillion.
The country’s 45 big banks hold most of the funds and assets at P22.593 trillion as of end-August which was 7.8 percent more than P20.958 trillion in 2022.
The 43 thrift banks, meanwhile, has P1.056 trillion of the total, 12 percent higher than same time last year of P943 billion.
The 369 rural banks and 22 cooperative banks accounted for P397 billion of total resources based on an end-March data, up 5.86 percent from P375 billion in 2022.
Similar with rural and cooperative banks, the BSP also takes its time in reporting NBFIs’ resources. As of end-December 2022, NBFIs accounted for P5.033 trillion of total resources, up 2.58 percent year-on-year.
NBFIs are investment houses, finance companies, investment companies, securities dealers/brokers, pawnshops and lending investors. Non Stocks Savings and Loan Associations (NSSLAs), credit card companies under BSP supervision, private insurance firms, Social Security System and the Government Service Insurance System are also classified as NBFIs.
There are 1,324 NBFIs without quasi-banking function as of end-August. These are investment firms, NSSLAs and pawnshops. Only five NBFIs have quasi-banking function which means they can borrow funds from 20 or more lenders. These include investment houses with trusts business, financing companies, among others.
Based on the BSP Report on the Philippine Financial System for the First Semester of 2023 which was released in October, the banking sector continue to grow in terms of deposits.
The banking sector is the core of the financial system and it continues to be resilient and stable with a strong balance sheet, profitable operations, sufficient capital and liquidity buffers, and ample provision for probable losses, said the BSP.
Meanwhile, bank deposits funded the key activities of banks such as lending and investing.
As of end-June, the total deposits increased 8.1 percent year-on-year to P17.8 trillion. About 84.6 percent or P15.1 trillion of the total deposits were denominated in peso, while 99.1 percent or P17.7 trillion were sourced from resident depositors.
The report said banks’ deposit mix provides insulation to the banking system from potentially significant funding withdrawals by investors due to developments in the global financial markets.
With adequate resources, deposits and earnings, the BSP said banks remain well capitalized and highly liquid, with a capital adequacy ratio and key liquidity ratios exceeding the BSP regulatory and international standards.
Last year, the financial system’s total resources amounted to P28.806 trillion, up by 9.3 percent from 2021’s P26.357 trillion.
The BSP in the October report said the Philippine financial system remained resilient and supportive of the country’s financing needs despite high inflation and tightened monetary policy.
The BSP target repurchase reverse or target RRP rate is currently at 6.5 percent and it has a tightening bias since the BSP's forward guidance indicate it will remain hawkish for longer as long as inflation is above-target.
As of end-October, the country's consumer price index stood at 6.4 percent average, way above the government target of two percent to four percent. The BSP forecasts that inflation will remain above four percent in the first six months of 2024.