CREDIT activity is expected to improve in the coming months after slumping to record lows in the previous months due to banks’ risk aversion during the global health crisis.

In a briefing on Wednesday, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said credit activity in the country is expected to improve in the coming months amid the accommodative monetary policy, the national government’s accelerated vaccination program, and implementation of granular lockdowns in the National Capital Region.

“This view is also consistent with the results of the latest banking industry survey which showed that credit outlook remains positive with double-digit growth in the next two years,” Diokno added.

Bank lending first collapsed into the contraction territory in December 2020 by 0.7 percent as the restrictions brought about by the pandemic affected the local banking industry. In comparison, the Philippines’s bank lending grew 13.6 percent before the onslaught of the global health crisis in March 2020.

Earlier this month, the BSP reported that bank lending contracted by 0.7 percent in July this year, slowing down from the 2-percent fall in the previous month.

Diokno also said that their latest assessment shows that the local banking system remained “stable and supportive” amid the pandemic. “The positive performance of the Philippine banking system is evidenced by sustained growth in its assets, deposits, and capital, as well as ample capital and liquidity buffers and loan loss reserves,” Diokno said. Based on end-July 2021 preliminary BSP data, banks’ total assets grew by 5.4 percent year-on-year to P19.8 trillion.

Bank assets were primarily in the form of loans and portfolio investments. Funding was sourced largely from deposits, which grew by 7.2 percent to P15.4 trillion.

“The BSP will continue to adopt policy reforms on risk governance aimed at promoting the continued safety and soundness of the financial system against the backdrop of rapid advancements in technological innovations, an evolving financial ecosystem, and the increasing attention towards the attainment of social and environmental goals,” Diokno said.

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