PH banks keep lending rules unchanged despite war impact

DRAGANA_GORDIC VIA FREEPIK

Most Philippine banks expect to keep their lending standards unchanged in the second quarter of 2026, a sign that credit growth may continue to support the economy even as the Middle East conflict weighs on the global outlook.

A quarterly survey of senior bank loan officers found that lenders largely plan to apply the same criteria they have been using to assess loan applications from businesses and households.

Lending standards refer to the terms and conditions banks set when extending credit, including interest rates, loan size, collateral requirements and repayment terms.

Using the “modal method,” which gauges the direction of credit standards based on the largest share of responses, most banks signaled no change ahead.

About 61.5 percent of respondents expect standards for business loans to remain unchanged in the second quarter, compared with 30.8 percent that anticipate tightening and 7.7 percent that see easing.

For household loans, 65.7 percent of banks expect standards to stay the same, outnumbering the 28.6 percent that foresee tighter rules and the 5.7 percent that expect looser lending.

Steady loan demand

A second measure, the diffusion index—which subtracts the share of banks expecting easing from those anticipating tightening and excludes those expecting no change—points to modest net tightening.

The results imply a 23.1 percent net tightening for business loans and a 22.9 percent net tightening for household loans.

Banks also signaled broadly stable demand for credit in the second quarter.

By the modal measure, 53.8 percent expect loan demand from businesses to remain unchanged, exceeding the 34.6 percent that see an increase and the 11.5 percent that anticipate a decline.