The country's banking sector sustained its growth momentum in the first six months of 2024, with strong assets, loans, deposits, capital, and liquidity positions, providing support to the economy and businesses, according to a semiannual report released by the Bangko Sentral ng Pilipinas (BSP) on Thursday, Nov. 7.
Based on the latest central bank report on the domestic financial system, the banking sector accounted for 83.4 percent of the financial system's total resources in the first half of the year. This has allowed banks to support the growth of the domestic economy.
“Banks remain the pillar of the Philippine financial system,” said BSP Governor Eli M. Remolona Jr. on Thursday.
He noted that the central bank’s financial reforms have "helped sustain the resilience of the banking sector, enabling banks to take a bigger role in the domestic economy through continued financial services to their clients, ultimately improving the financial future of every Filipino.”
The total assets of the banking system stood at P26.2 trillion in June, up 12.4 percent year-on-year. The BSP said the asset growth was mostly funded by deposits, which banks use for lending and investment activities, collectively accounting for 81.6 percent of total assets.
In the first six months, gross loans increased by 12.4 percent to P14.3 trillion, with lending expanding to households and key productive sectors.
The BSP said loan quality was still “satisfactory” despite the increase in non-performing loans. The "combined effect of challenges from post-pandemic recovery and elevated borrowing costs due to the high-interest-rate environment affected the paying capacity of both business and individual borrowers." For the first six months, soured loans grew 14.8 percent year-on-year to P502.4 billion.
The BSP said in a statement Thursday that it will “continue to pursue prudential policy reforms aimed at promoting institutional stability, digitalization, and inclusive sustainable finance.”
“The BSP will also sustain its cooperation and collaboration with industry partners, stakeholders, and key government agencies to advocate for necessary legislation towards a resilient, dynamic, and inclusive financial system,” it added.
In the first half of 2024, the BSP issued policies in line with its strategic agenda. It noted that the stability of the banking system remains rooted in strong corporate governance and sound risk management.
In April, the BSP heightened its requirements for banks to manage risks related to money laundering, terrorist financing, and proliferation financing.
In May, the BSP amended the derivatives licensing framework and expanded the list of derivatives activities classified as generally authorized derivatives activity (GADA). This amendment “considers any financial derivative that is traded as GADA in an organized market, which would not require any license from the BSP.”
The BSP instituted reforms and issued guidelines on digitalization and green funding in the first half of 2024.
In pursuing digitalization, the BSP said it “continues to be mindful that alongside the digital transformation, information technology risks and cybersecurity threats may undermine the integrity of the financial system.”
It has actively engaged in cyber-resilience initiatives and launched the 2024-2029 Financial Services Cyber Resilience Plan (FSCRP).
To further the Philippines’ climate commitment and sustainable development goals (SDGs), the BSP issued the Philippine Sustainable Finance Taxonomy Guidelines in February.
“The issuance of the taxonomy marks an important step in the Philippines’ sustainability journey, providing supervised entities with high-level guidance in determining whether an economic activity is environmentally and socially sustainable and making informed investment or financing decisions,” it said.
These are some of the BSP policy initiatives introduced in the first six months of this year that the central bank said will prepare banks to “take on a bigger role in supporting the growth of the domestic economy.”