THE PHILIPPINE banking sector’s continuing power can provide a catalyst for economic activity, said the Bangko Sentral ng Pilipinas (BSP).
This comes amid poor growth prospects in the near term, as lingering concerns over corruption involving government infrastructure projects have drawn public and private investment.
Assets and deposits of Philippine banks saw steady growth, reflecting the industry’s resilience, the BSP said in a report. “The banking system remains strong to support economic activity.”
The latest data showed that as of October, the combined assets of the Philippine banking system grew by 7.13% year-on-year to P28.292 trillion amid steady loan growth and deposit inflows.
Bank assets are mainly backed by loans, deposits, and investments.
Central bank data also showed that deposits increased by 6.96% year-on-year to P20.82 trillion as of October from P19.465 trillion.
“The year-on-year increase in bank assets mainly reflects continued growth in loans to households and businesses, improved deposit inflows as usual, and higher holdings of government securities that boosted balance sheets at the beginning of the year,” said Robert Dan J. Roces, economist at SM Investments Corp., in a Viber message.
“Looking ahead, asset growth should remain positive but very moderate, supported by deflation, rate cuts, and continued credit demand, as banks continue to choose and manage maturity and liquidity risks carefully,” he said.
The BSP added in the report that the banks have stable asset quality and adequate capital collateral.
“Lending by U/KBs (international and commercial banks) also increased significantly, providing the necessary funding to develop the country’s economy.”
Bank lending has posted double-digit growth since May 2024. However, the latest BSP data showed that central banks’ loans to businesses and individual consumers expanded at their slowest pace in 16 months in October, rising 10.3%.
“Furthermore, banking policies during the review quarter were implemented to strengthen the regulatory environment and improve the operational stability of the financial sector,” said the BSP.
This includes the director’s amendments and thefsnow incompetence regulations, adoption of Global Repurchase Agreement (GMRA) based repo and reverse repo agreements, and daily withdrawal limit policy further strengthened the banking sector.
Towards the end of 2024, the BSP began implementing the GMRA, enabling it to provide bonds to banks during repo transactions as part of its monetary policy tools.
Meanwhile, it issued a circular in mid-September capping P500,000 daily cash withdrawals as an anti-fraud measure amid recent corruption.
The policy limits account holders’ withdrawals to P500,000 or its equivalent in foreign currency at one time or through multiple transactions during one banking day.
Economists have admitted that the 5.5%-6.5% annual target is now out of reach after a third of gross domestic product (GDP) fell to a four-year low of 4% amid an ongoing dispute over flood control.
BSP Governor Eli M. Remolona, Jr. this month said GDP growth may drop to 3.8% this quarter. This will bring the annual rate below 5% compared to the government’s annual target.
The BSP official said they expect the economy to improve in the second half of 2026, as growth appears to be approaching the government’s target of only 6-7% in 2027. KK Chan
