Report on the results of the quarterly Senior Bank Loan Officers' Survey conducted by the BSP to enhance its understanding of banks’ lending behavior, which is an important indicator of the strength of credit activity in the country.
Latest issue:
Fourth Quarter 2024
CONCEPT AND DEFINITION OF TERMS
Listed below are the definition of terms covered in the SLOS:
1.
Asset portfolio. A grouping of financial assets such as stocks, bonds and cash equivalents, mutual funds, and real estate and other physical properties.
2.
Collateral. The security given by a borrower to a lender as a pledge for the repayment of a loan. This could include certain financial securities, such as equity or debt securities, real estate or compensating balances (a compensating balance is the minimum amount of a loan that the borrower is required to keep in an account at the bank).
3.
Commercial real estate loan. This refers to loans provided to real estate property developers.
4.
Covenant. An agreement or stipulation laid down in loan contracts, particularly contracts with enterprises, under which the borrower pledges either to take certain action (an affirmative covenant), or to refrain from taking certain action (a negative covenant); this is consequently part of the terms and conditions of the loan.
5.
Credit line. A facility with a stated maximum amount that an enterprise is entitled to borrow from a bank at any given time. For the purposes of the survey, developments regarding credit lines should be interpreted as changes in the net amount that can be drawn down under either an existing or a new credit line.
6.
Credit standards. The internal guidelines or criteria that reflect a bank’s lending policy. They are the written and unwritten criteria, or other practices related to this policy, which define the types of loan a bank considers desirable and undesirable, its designated geographical priorities, collateral deemed acceptable or unacceptable, etc. For the purposes of the survey, changes in written loan policies, together with changes in their application, should be reported. While each bank has its own bank-specific credit policies that guide the overall direction of loan provision, when referring to credit standards, the BSP is interested in how banks’ credit policy is implemented when loan officers deal with individual banks/clients. The BSP hopes to capture through the survey the marginal changes in banks’ lending attitudes, i.e., whether the banks are more liberal or conservative in applying internal guidelines when they deal with individual banks.
7.
Credit terms and conditions. These refer to the specific obligations agreed upon by the lender and the borrower. In the context of the bank lending survey, they consist of the direct price or interest rate, the maximum size of the loan and the access conditions, and other terms and conditions in the form of noninterest rate charges (i.e. fees), collateral requirements (including compensating balances), loan covenants and maturities (short-term versus long-term).
8.
Interest rate floor refers to the minimum interest rate set by banks for loans. Increased use of interest rate floors implies generally tighter credit conditions.
9.
Loan-to-value ratio. The ratio of the amount borrowed to the appraisal or market value of the underlying collateral, usually employed in relation to loans used for real estate financing.
10.
Maturity. Maturity as used in the bank lending survey is original maturity, and only two types are used: short-term and long-term. Short-term loans are loans with an original maturity of one year or less; long-term loans have an original maturity of more than one year.
11.
Market financing refers to ability of a financial institution to raise funds from the money (short term debt financing) and capital (equities and bond) markets.
12.
Non-bank lenders. In general, these consist of non-monetary financial corporations, in particular insurance corporations and pension funds, financial auxiliaries and other financial intermediaries.
ANALYSIS OF SURVEY RESULTS
In the modal approach, the results of the survey are analyzed by looking at the option with the highest share of responses. The three options for the modal approach are either 1) tightening, 2) easing, or 3) unchanged credit standards for loans to enterprises and for loans to households.
In the DI approach, a positive DI for credit standards indicates that the proportion of respondent banks that have tightened their credit standards exceeds those that eased (“net tightening”), whereas a negative DI for credit standards indicates that more respondent banks have eased their credit standards compared to those that tightened (“net easing”). Meanwhile, an unchanged credit standard in the DI approach indicates that the proportion of the respondent banks that have tightened their credit standards is equal to those that eased their credit standards.
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