The Bangko Sentral ng Pilipinas (BSP) yesterday reported that the 37 big banks' real estate exposures remain manageable and are covered adequately by capital.
Based on its internal credit risk simulations, the banks will be able to comply with the 10 percent capital adequacy ratio - which is the minimum imposed by the BSP - even if 50 percent of all real estate exposures will have a write down or reduced value.
As of end-March, the universal and commercial banks' real estate exposures rose 2.5 percent to P842.6 billion in the first quarter from end-2012. In a statement, the BSP attributed the minimal increase to the big banks' real estate loans during the quarter which rose 1.7 percent to P715.5 billion.
About 85 percent of total industry real estate exposure is contributed by real estate loans. Of these real estate loans, 78 percent are residential for the acquisition, construction and improvement of housing units. "The exposure of banks to such residential real estate loans remains manageable as the non-performing portion was only four percent of residential real estate loans in March," said the BSP.
The central bank also monitored banks' investments in real estate securities which increased by seven percent to P127.1 billion during the period. These real estate investments accounted for 15 percent of total real estate exposures.
According to the BSP, after assessing the industry's real estate exposure using its own internal simulations on credit impairment, banks' capital adequacy ratio will comfortably stay above the 10 percent minimum requirement even with a simulated 50 percent write down on real estate exposures.
The BSP again explained that under the expanded real estate reporting system for banks, real estate exposure covers loans to developers of socialized and low-cost housing, loans to individuals, loans supported by non-risk collaterals or Home …