A KEY legislator said Friday that banks need to justify their privileged place in receiving government help during a crisis by lending more, noting that lending growth remains weak despite record-low interest rates that were designed by the central bank to make lending easier.
Albay Representative Jose Ma. Clemente S. Salceda, who chairs the House Ways and Means Committee, said the Bangko Sentral ng Pilipinas (BSP) effectively unlocked P1.9 trillion worth of liquidity between March to December 2020.
“You are not hedge funds. Your role in Philippine society is to lend. The reason why we prioritize saving you above most other sectors is that you play that critical role in economic recovery,” Mr. Salceda said at a House committee on banks hearing.
Bank lending during an economic crisis is highly correlated to economic growth, according to studies of the recovery from the 2007 Asian Financial Crisis conducted by the Asian Development Bank
“If you do not play that role… why should we ask the taxpayer and the depositor to make sacrifices on your behalf?” he added.
Bank lending fell for the first time in over 14 years in December, with outstanding loans dropping by 0.7% to P9.18 trillion, the BSP announced on Feb. 4.
Mr. Salceda also said that the central bank’s efforts to prop up the economy “will remain unsuccessful” unless the banks lend more to their customers.
He said that reserve repurchase rate is at 2%, lower than inflation rate of 4.2%.
Mr. Salceda that banks cannot continue to park their funds with the BSP instead of lending, noting that reserve repurchases by banks increased by 1.5% between March and December 2020.
“In simple terms, interest rate cuts simply did not translate into lower rates or more credit for Filipino borrowers. They didn’t work,” he said.
He said the banking sector “still needs to be disrupted,” noting that banks need adopt innovative credit profiling methods used by financial technology companies.
He said fintechs are filling the lending gap left nehind by banks, and added that he intends to support the passage of House Bill No. 7863 which aims to establish a fair and inclusive credit reporting system to increase the access to credit of the most vulnerable sectors. — Vann Marlo M. Villegas