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FCDU Loans Further Rise in Third Quarter

12.28.2007

As of end-September 2007, outstanding loans granted by Foreign Currency Deposit Units (FCDUs) of banks stood at US$3.5 billion, expanding by US$276 million (or 8.5 percent) from the end-June level of US$3.3 billion. New loans granted during the period exceeded the previous quarter’s total by US$337 million.

Year-on-year,   however,   FCDU loans declined by US$441 million   (or 11.1 percent) due to larger loan repayments versus new disbursements. Repayments include prepayments by BSP of US$616 million and PNOC-EDC of US$116 million.

 An FCDU is that unit of a local bank or local branch of a foreign bank authorized by the Bangko Sentral to engage in foreign currency- denominated transactions such as accepting deposits and lending in foreign currency.

More than half (51 percent) of the FCDU loan portfolio had medium to long-term maturities (that is, original payment terms of more than one year), and reflected a growth of 24 percent from the previous quarter. This would allow FCDU borrowers longer period to service their obligations.

FCDU loans were mostly availed of by the productive sectors of the economy.  Commodity and service exporters accounted for 22 percent of the total loan portfolio, followed by producers/manufacturers, including oil companies with a 19 percent share. Private sector borrowings stood at 95 percent from 94.3 percent in June. About 82 percent of outstanding FCDU loans went to Philippine residents.  FCDU borrowers with foreign exchange earnings have a natural hedge for their foreign exchange exposures.

The rising   trend   for   FCDU   deposit    liabilities observed since end-September 2005 continued, with deposits reaching US$19.8 million at the close of the third quarter this year. The bulk (95 percent) of these deposits were owned by residents, including overseas Filipino workers. With the bigger expansion in FCDU loans compared to deposits, the overall loans-to-deposits ratio (which relates the current period’s loan portfolio to the level of FCDU deposits two quarters back) improved to 18.6 percent as of end-September 2007 from 17.3 percent a quarter ago.

Please refer to the attached table for details.

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