Loans outstanding of commercial banks (KBs) grew by 0.9 percent year-on-year to about P1.539 trillion as of end-December 2005. This was lower than the 2.1 percent year-on-year growth in the previous month. On a month-on-month basis, KB loans declined by 2.2 percent, a turnaround from the 5.0 percent growth registered in November.
Banks’ lending activities were channeled to the following sectors: the financial institutions, real estate and business services sector (FIREBS), which contributed 3.64 percentage points to the loan growth; agriculture, fisheries & forestry (0.15 percentage point); and community, social & personal services (0.04 percentage point). However, reduced demand for some goods and services resulting from the increase in the prices of oil and other production inputs could have also influenced the reduction in credit demand from the following sectors: wholesale & retail trade (-1.34 percentage points); electricity, gas and water (-0.46 percentage point); manufacturing (-0.44 percentage point); transportation, storage & communication (-0.40 percentage point); and construction (-0.25 percentage point).
The BSP continues to promote further the health of the banking system in order to allow banks to carry on with their intermediation functions—a vital component of the country’s growing economy. The cleaning up of banks’ balance sheets remains a policy priority as the BSP supports the extension of the Special Purpose Vehicle Act which is now with Congress.