Regulators monitor rising debt; banking system holds firm

A central bank-led government group tasked with shielding the financial system from market shocks said the banking system remained resilient, but cautioned that rising exposure to large corporations, a surge in consumer lending and shifting business models among nonbank financial firms could pose risks.

In a statement, the Financial Stability Coordination Council (FSCC) reaffirmed the strength of the Philippine financial system.

“The banking system’s resilience is underpinned by strong capital and liquidity,” Bangko Sentral ng Pilipinas Gov. and FSCC Chair Eli Remolona, Jr. said.

Apart from the central bank, the FSCC also includes the Department of Finance, Securities and Exchange Commission, Insurance Commission and the Philippine Deposit Insurance Corp. (PDIC).

Looking ahead, the council said it was monitoring concentration risks and remains alert to potential systemic vulnerabilities.

Such risks arise when exposures are heavily concentrated in a single borrower, sector or asset class. This raises the possibility that shocks in one area could ripple through the broader financial system.

Strong balance sheets

While corporate balance sheets remain generally sound, the council said concentrated exposures could amplify shocks as ties deepen between large conglomerates and key sectors of the economy.

It also cited rising leverage among nonfinancial corporations, referring to their accumulated debt across loans and bonds.

FSCC members also discussed increases in corporate leverage, consumer credit and housing loans. While these reflect economic activity, the council noted that “growth and risk often travel together.”

To address emerging risks from nonbank financial institutions adopting new business models, the FSCC said it was expanding its monitoring network, improving data quality and strengthening oversight.

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The council also cited efforts by the PDIC to refine early intervention frameworks aimed at addressing bank distress more quickly and preserving public confidence in the financial system.

The FSCC earlier said a comprehensive mapping of corporate linkages in the Philippines would be its priority initiative for 2026.

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