Loans released by banks’ foreign currency deposit units (FCDU) mostly for the export and energy sectors, increased by 1.6 percent year-on-year or by $240.70 million at the end of June to $15.633 billion versus $15.392 billion same period in 2023.
The central bank said the increase in FCDU lending was due to “disbursements (exceeding) principal repayments.”
FCDUs are units of local banks or branches of foreign banks authorized by the Bangko Sentral ng Pilipinas (BSP) to transact in foreign-currency denominated deposits and to invest and buy foreign exchange.
On a quarter-on-quarter basis, FCDU loans fell 2.7 percent or by $438.58 million from end-March level of $16.072 billion.
As of end-June, specifically for the second quarter months of April to June, the maturity profile of the FCDU loan portfolio remained predominantly medium- to long-term, comprising 76.7 percent of the total. These are loans payable over a term of more than one year.
During the period, FCDU loans to residents accounted for 60.7 percent of the total or $9.48 billion.
The majority were borrowings from these sectors: 26.2 percent or $2.49 billion from the merchandise and service exporters; 22.4 percent or $2.12 billion power generation companies; and 17.7 percent or $1.68 billion from businesses involved in towing, tanker, trucking, forwarding, personal and other industries.
Based on BSP numbers, gross FCDU disbursements totaled $19.9 billion in the second quarter, up by 3.9 percent compared to $19.15 billion in the first quarter.
Loan repayments reached $20.33 billion which was 11.5 percent higher than the previous quarter’s $18.23 billion.
Meanwhile, as of end-June, FCDU deposit liabilities amounted to $55.16 billion. This was 5.9 percent or $3.46 billion lower compared to $58.61 billion in end-March.
On a year-on-year basis, FCDU deposit liabilities increased by 12.6 percent or by $6.17 billion from $48.99 billion same period in 2023.
The BSP said bulk of FCDU deposit liabilities worth $53.85 billion or 97.6 percent of the total, were owned by residents. This amount is “essentially constituting an additional buffer to the country’s gross international reserves (GIR),” said the BSP.
As of end-August this year, the Philippines has a US dollar stock of $107.857 billion. The highest recorded GIR was $108.794 billion in 2021. The BSP utilizes its GIR as first line of defense against any speculative attacks on the local currency.
International reserves, which the BSP refers to technically as the GIR, is the country’s investments in foreign-issued securities, monetary gold, and foreign exchange. It also includes reserve position in the International Monetary Fund.
“Being the lender of last resort, the BSP holds international reserves for the foreign exchange (FX) requirements of the country in case the supply of FX from domestic commercial banks falls short of the total demand," said the BSP.
It added that the GIR serves as "stand-by fund to finance the deficit that may arise from the combined current and capital and financial transactions. Consequently, financing the deficit reduces the level of reserves."