The BSP has been told to monitor banks’ exposure to manufacturing, the public sector
The International Monetary Fund (IMF) has urged the Bangko Sentral ng Pilipinas (BSP) to carefully monitor the exposure of banks to the manufacturing and public sector amid uncertainty over global exchange rate policies.
In a report following the Article IV Consultation with the Philippines, the IMF noted that the productivity of the manufacturing sector remains low and global trade problems pose risks to manufacturing and wholesale or retail lending.
“Financial receipts in the manufacturing sector have been weak and the soundness of manufacturing and wholesale loans, which accounted for 19% of domestic loans at the end of August 2025, may be affected by developments in global trade,” it said.
As of Aug. 7, the US has been imposing a 19% tariff on most Philippine goods, the same amount imposed on goods from Cambodia, Malaysia, Indonesia and Thailand.
The US is often the top destination for Philippine exports.
The latest central bank data showed that banks provided P1.179 trillion in loans to the manufacturing sector at the end of October, equivalent to 8.5% of the P13.793-trillion total bank loans during the period.
Banks also lent P1.58 trillion to wholesalers and retailers in the 10-month period, accounting for 11.5% of total loans.
The S&P Global Philippines Manufacturing Purchasing Managers’ Index (PMI) fell sharply to 47.4 in November, down from 50.1 in October. This was the biggest decline in four years as production and new orders fell in November.
At the same time, the IMF said the central bank should monitor household debt as low levels of savings among households add to the fragility of financial systems.
“Domestic debt, fueled by strong growth in home loans, rapid growth in bank credit cards and payday loans, and increased access to credit through NBFIs (non-banking financial institutions) and digital finance mandates, is to be carefully monitored, given low household savings rates,” it said. “So is banks’ exposure to the public sector, which has increased since the pandemic.”
The latest BSP data showed that consumer loans rose 21.26% year-on-year to P3.537 trillion as of September.
CORPORATE OBLIGATIONS
Meanwhile, the IMF said the financial system could also be more vulnerable to risks arising from the close relationship between banks and the corporate sector.
“The connection between banks and the corporate sector, including complex structures, may expose the financial system to risks,” said the statement. “NBFIs, some of which are not supervised by the BSP, are very small, but they have expanded lending activities in real estate, consumer loans, and micro, small and medium enterprises (MSMEs).”
The Financial Stability Coordination Council has previously said that it has recently seen a strong connection between the financial system and non-financial corporations.
However, the FSCC noted that the associated risks remain from housing market trends and the strength of the corporate and domestic sectors, although they are constrained by strong bank capital, healthy liquidity, and adequate capital loss provisions.
Meanwhile, the IMF said the Philippines should improve its macroprudential policy framework to reduce potential risks and vulnerabilities.
“Replacing the commercial property exposure cap with a structured risk buffer would help contain broader risks in the real estate sector and provide banks with value-based incentives to align their loan portfolios and capital buffers with systemic risk; although its implementation will need to ensure that there are no unintended changes in the context of macroprudence,” it added.
At the end of September, the average exposure of subsidized housing in the banking system stood at 19.54%, down from 19.61% at the end of June and 19.55% last year. The BSP has limited mortgage lending to banks at 25% of its total loan portfolio.
Central bank data also showed that past-due loans eligible for housing loans increased by 7.06% year-on-year to P158.619 billion at the end of September from P148.157 billion previously.
This, as residential mortgage loans increased by 5.16% to P110.379 billion, while real estate loans increased by 11.7% to P48.24 billion. – Katherine K. Chan
