Philippine banks still in ‘good shape’ despite oil crisis — Remolona

By Katherine K. Chan, Reporter

WASHINGTON, D.C. — Several Philippine banks have flagged concerns about their capital levels, but the broader financial system remains in “very good shape” despite shocks stemming from the Middle East conflict, the Bangko Sentral ng Pilipinas (BSP) said.

In an exclusive interview with BusinessWorld, BSP Governor Eli M. Remolona, Jr. said the sector’s stable position even before the war broke out gave it ample buffers against current energy shocks.

“I think in terms of the financial system, we’re fortunate that when this energy shock happened, we were also in a good position to weather that shock. So, the banks are in very good shape,” he said on the sidelines of the International Monetary Fund and World Bank’s 2026 Spring Meetings here last week.

Mr. Remolona said Philippine banks’ capital stands at about 16% relative to their assets, exceeding the 10% international standard.

“Some banks, a few banks, are worried about their capital, but it’s not systemic,” he added.

Domestic banks have also maintained a high level of liquidity, the central bank chief noted, with about 180%. This is likewise above the 100% global benchmark.

Meanwhile, Mr. Remolona said banks’ lending activity remains “pretty strong” even as growth returned to single digit, with nonperforming loan (NPL) ratios still “reasonable.”

“The NPLs, the default rates are reasonable. They haven’t spiked up so far. So, that’s reassuring,” he said.

Latest available BSP data showed that bank lending continued to expand by a single-digit rate for a third straight month. In February, domestic lenders disbursed P14.269 trillion worth of loans, up 9.5% year on year from P13.027 trillion.

On the other hand, the banking sector’s gross NPL ratio hit a six-month high in February after climbing to 3.33% from 3.31% in the prior month but eased from the 3.38% seen a year earlier. NPLs are loans unpaid for at least 90 days after the due date and are deemed risk assets since borrowers are unlikely to pay.

Asked if the central bank is concerned about slowing loan growth, Mr. Remolona said: “(I)t’s still pretty good. We do worry about it. Our job is to worry.”

“But the situation suggests that, at least on the banking side, it’s not that worrisome,” he added.

Last week, international credit rater Moody’s Ratings said in a report that the Philippine banking system stands “well capitalized, profitable, and competently managed” despite looming risks from the ongoing Middle East conflict.

It affirmed the “Baa2/P-2” long- and short-term issuer and deposit ratings of China Banking Corp., (Chinabank), Philippine National Bank (PNB) and Security Bank Corp., and maintained its “stable” ratings outlooks for Chinabank and PNB but revised Security Bank’s to “stable” from “negative.”

Following this, Mr. Remolona vowed that the BSP will ensure sound regulations and prudent management of its international reserves as it moves to maintain financial stability amid the energy crisis.

The central bank chief also noted in his interview with BusinessWorld that the country continues to maintain an ample level of gross international reserves (GIR).

As of end-March, the Philippines’ GIR fell by 5.08% to a seven-month low of $107.512 billion from $113.264 billion last month.

Still, it stood well above the three-month global standard in terms of imports with 7.1 months’ worth. It also covers around 3.9 times the country’s short-term external debt based on residual maturity.

“So, that’s pretty good. That’s more than ample,” Mr. Remolona said.