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BSP mulls hike in real estate exposure limit
By Prinz P. Magtulis (The Philippine Star) Updated October 12, 2012 12:00 AM


MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) is open to raising real estate exposure limit of lenders with an official saying bank reports due by yearend will give regulators opportunity to analyze if there is a need to support economic growth.

“Our objective right now is to have an accurate picture to what extent, in totality, are our banks — thrift, commercial, banking groups — exposed to real estate. We will begin to get that data starting end of this year,” BSP Deputy Governor Nestor Espenilla Jr. told reporters last Wednesday night.

“So the next step, once we get a better handle on the data is to analyze the data and determine whether there are more macroprudential measures we need to introduce,” he added.

Asked if BSP is willing to raise the 20-percent cap on real estate exposure, Espenilla replied: “We cannot rule out those things but we need to also inform our policy measures properly.”

The limit is set by the central bank to avoid excessive bank lending to the real estate sector, which could trigger asset bubble formation, a situation when property prices soar that they do not reflect real market rates. Such is seen detrimental to economic growth.

As of the first semester, real estate exposure — the proportion of real estate loans to total loan portfolio — stood at 14.97 percent, up slightly from 14.26 percent a year ago but down from 15.19 percent in the first three months of the year.

In August, BSP released new methods to measure property exposure, which, among others, included bank investments that will later on finance real estate activities in the computation. This will be in addition to reports banks regularly submit, Espenilla said.

That data will give regulators a good view of “where we are right now,” he added, and then “based on what we see, then we have to craft the appropriate policy.”


“Remember, we have to balance because the economy needs to grow and the real estate is a legitimate investment area. So we do not really want to suppress it necessarily,” Espenilla said.

He stressed, however, that there are many ways to do it, and that raising the 20-percent limit is just one thing. “We can (also) redefine the formula being used,” he added.

Espenilla, however, was quick to point out that BSP would be vigilant in actions it will take as far as real estate lending is concerned.

“But again, I emphasize, we are not seeing at this point in time crisis in the property market. But I think it’s only prudent for the BSP to be vigilant and monitor things and that’s what we’re doing right now,” he stressed.

Source:
http://www.philstar.com/Article.aspx?publicationSubCategoryId=66&articleId=858485