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Manila Bulletin devider Business devider The Economy devider Middle East war among risks to Philippine financial system—FSCC

Middle East war among risks to Philippine financial system—FSCC

Published May 25, 2026 01:02 pm

The interagency Financial Stability Coordination Council (FSCC) has flagged rising risks to the Philippine financial system stemming from the prolonged war in the Middle East, increasing corporate vulnerabilities, and growing household debt, although officials said the country’s banking sector remains resilient.

During its quarterly meeting last May 20, the FSCC acknowledged that a prolonged Middle East conflict could drive oil prices higher, weaken market sentiment, tighten financial conditions, as well as slow both global and domestic economic growth, it said in a statement on Monday, May 25.

“Geopolitical risks remain a key source of uncertainty. We are watching global developments closely to spot and address potential systemic risks,” FSCC Chairman and Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona Jr. said.

The FSCC is composed of the BSP, the Department of Finance (DOF), the Insurance Commission (IC), state-run Philippine Deposit Insurance Corp. (PDIC), and the Securities and Exchange Commission (SEC).

The council identified corporate debt exposures in energy- and interest rate-sensitive sectors as areas requiring close monitoring, warning that higher energy costs and tighter financing conditions could increase debt-servicing burdens and squeeze corporate margins.

According to the FSCC, these pressures could eventually affect bank asset quality, while rising bond yields may also result in valuation losses on banks’ securities holdings and potentially weaken capital buffers if market volatility persists.

A May 25 report by Capital Economics Asia-Pacific markets head Thomas Mathews showed that week-to-date, 10-year Philippine government bond yields jumped the fastest among emerging markets (EMs), even as the nearly 40-basis-point (bp) increase was lower than the intraweek high of an almost 50-bp climb.

Also, the FSCC raised concerns over rising household debt and said authorities are closely monitoring borrowers’ ability to service loans as borrowing costs continue to increase.

“We see pockets of vulnerability in energy- and interest-rate-sensitive sectors and in valuation pressures from higher bond yields. Nonetheless, the financial system remains on solid footing,” Remolona said.

“Banks have adequate capital and liquidity buffers to absorb shocks and keep lending to households and firms,” he added.

The FSCC said it is strengthening oversight of non-bank financial institutions (NBFIs), including quasi-banks, investment houses, non-stock savings and loan associations, pawnshops, and trust corporations, the BSP said.

It added that the council is likewise working to improve the monitoring of system-wide risks and interlinkages across the financial sector.

Related Tags

Financial Stability Coordination Council (FSCC) Bangko Sentral ng Pilipinas (BSP) Eli M. Remolona Jr. Middle East war Department of Finance (DOF) Insurance Commission (IC) Philippine Deposit Insurance Corp. (PDIC) Securities and Exchange Commission (SEC) Capital Economics emerging markets (EMs)
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