PHILIPPINE BANKS widely expect standards and demand for loans to remain unchanged in the third quarter as the banking industry stays resilient despite global geopolitical woes, a survey by the Bangko Sentral ng Pilipinas (BSP) showed.
Based on the BSP’s latest Senior Bank Loans Officers’ Survey (SLOS), 75.5% of those polled using a modal approach are seeing stable standards for business loans, up from 71.7% in the previous quarter.
At the same time, 80% anticipate the steady standards for household loans, up from 71.4% in the prior quarter.
“Most Philippine banks expect to maintain their lending standards in Q3 2026, indicating the banking system’s stability and capacity to support the economy through credit despite persistent geopolitical uncertainty,” the central bank said in a statement on Thursday.
Meanwhile, fewer banks expect tighter credit standards in the third quarter, with 18.9% for businesses (from 28.3% in the second quarter) and 20% for households (from 25.7% in the previous quarter).
“For those expecting credit standards to tighten, survey responses suggest a moderation in the tightening bias among banks for loans to both enterprises and households,” the BSP said.
On the other hand, 5.7% see easing lending standards for businesses from 0% in the prior quarter. None of the banks surveyed expect credit standards to loosen for households, down from 2.9% a quarter ago.
Lending standards are used by banks when approving loans. These include interest rates, loan size, collateral, loan conditions, and repayment terms.
The SLOS uses two approaches, one being modal, which requires a categorical response such as whether banks will tighten, ease, or maintain their credit standards.
Meanwhile, using the diffusion index (DI), which reflects the net difference between the respondents’ answers, the survey shows a net 13.2% of banks expect to tighten standards for business loans, lower than the 28.3% in the second quarter.
Slightly fewer banks or 20% anticipate the same for household loans, from 22.9% in the April-to-June period.
“The corresponding diffusion index for both businesses and households remained positive, indicating a net tightening bias,” the BSP said. “Respondents cited a less favorable or more uncertain economic outlook, reduced risk tolerance, and a deteriorating borrower profile as factors that could lead them to tighten credit standards.”
LOAN DEMAND
Meanwhile, more banks expect higher demand for business loans in the July-to-September period at 30.2% from 17% previously.
This came as fewer lenders or 64.2% (from 73.6%) projected steady demand, while 5.7% (from 9.4%) saw loan demand from businesses falling during the period.
“The expected increase in enterprise loan demand may be attributed to higher customer inventory financing needs, higher accounts receivable financing needs, and an improved customer economic outlook,” the central bank said.
For household loans, 57.1% see steady demand holding up, lower than the 74.3% recorded in the previous survey.
With this, the share of banks expecting demand for household loans to increase jumped to more than a quarter or 31.4% for the current three-month period from 11.4% in the prior quarter.
On the other hand, around 11.4% of banks surveyed expect demand to weaken, down from the 14.3% posted in the second quarter.
“Banks expecting higher household loan demand cited stronger household consumption, lack of other sources of funds, higher housing investment, and more attractive bank financing terms as the key drivers,” the BSP noted.
Under the DI, a net 24.5% of lenders anticipate higher demand for enterprise loans, while a net 20% of lenders see the same for household loans. These are up from 7.5% and -2.9%, respectively, in the second quarter.
For the third-quarter SLOS, the BSP surveyed 60 banks from June 3 to July 7, but only 56 responded or a response rate of 93.3%. This included senior loan officers from universal and commercial banks, thrift banks, and rural banks across the country.
Earlier this year, the central bank said geopolitical shocks from the ongoing Middle East war have minimal direct impact on the local banking system. However, it also noted that tighter financial conditions amid rising borrowing costs and uncertainties over the war may dampen Philippine banks’ lending growth this year.
The latest BSP data showed big banks’ lending rose by 12.1% to P14.989 trillion in May from P13.37 trillion a year earlier, picking up from the 11.4% growth posted in April. This marked the sector’s fastest loan growth in 15 months or since the 12.2% in February 2025. — Katherine K. Chan
previous post
