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ATK KimEng remains overweight on PHL real estate sector; claims new regulation on credit risk management has neutral effect on banking industry

Posted on November 2, 2014

By Joann Santiago

MANILA, Nov. 2 (PNA) — Maybank ATK KimEng continues to favor the real estate sector of the Philippines on belief that asset bubble is far from happening in the country.

In a research note, the investment bank said the latest regulation of the Bangko Sentral ng Pilipinas (BSP) enhancing the regulation on credit risks management of banks and quasi-banks have a neutral effect on the banking sector vis-à-vis their exposure in the real estate sector.

It cited reports quoting BSP Governor Amando Tetangco Jr. saying that: “There are certain segments in the entire sector where prices or valuations may be rising too fast but overall, if you look at the entire sector, you don’t see any clear evidence of a real estate bubble”.

“This confirms our view that last week’s revised credit risk rules are neutral for the property sector as it introduces no new regulation for property lending,” it said.

Relatively, the central bank’s policy-making Monetary Board (MB) have also approved a rule lessening the weight of collateral in the approval of loans to check on the financial institutions’ credit risk management quality and to align the rules with international standards.

Tetangco said this decision aims to focus and assess bank’s internal credit environment quality.

He said “prudent lending should be primarily based on solid analysis of credit worthiness and quality of cash flows.”

“By discouraging obsession with collateral, the new regulations promote better access to credit by those who are not necessarily collateral heavy but do have the ability to pay from business operations or other regular cash flows,” he added.

With these, the research note said that “the latest statements by Governor Tetangco should help alleviate concerns not only about a property bubble but also that the central bank is acting to slow property lending.” (PNA)

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