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Banks’ FCDU loans drop in Q2

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Bangko Sentral ng Pilipinas (BSP)

By Melissa Luz T. Lopez
Senior Reporter

FOREIGN CURRENCY loans granted by banks slid during the second quarter as more businesses settled their dues, the Bangko Sentral ng Pilipinas (BSP) said.

Loans granted under banks’ foreign currency deposit units (FCDUs) amounted to $15.669 billion as of end-June, 4.2% lower than the $16.359 billion in outstanding credit lines as of the first quarter.

However, the amount grew by 11.9% year-on-year coming from the $14.001 billion loans expressed in other currencies, according to latest central bank data.

FCDUs are bank units authorized by the central bank to conduct transactions involving foreign currencies, mainly by accepting deposits and handing out loans.

The marked decline from the first quarter came as principal repayments exceeded disbursements, BSP officer-in-charge Deputy Governor Chuchi G. Fonacier said in a statement over the weekend.

Borrowers settled $676 million worth of credit, which is 4.9% higher than the previous quarter. On the other hand, gross loan releases during the second quarter went down by six percent to $14.6 billion.

Firms engaged in towing, tanker, trucking and forwarding businesses took a fourth of the loan lines, followed by merchandise and service exporters which accounted for 20% of the FCDU borrowings. Public utility firms got hold of a tenth, while producers/manufacturers, including oil companies received four percent of the sum.

Two-thirds of the loans were secured by Philippine residents at $10.312 billion, which come from privately owned companies. Non-resident borrowers also secured $5.357 billion worth of credit.

By source, local banks provided $13.669 of the loan amounts while foreign lenders extended $2 billion.

Meanwhile, foreign currency deposits maintained by banks amounted to $37.942 billion, more than enough to support loan demand and serves as an additional buffer together with the central bank’s dollar reserves.

The central bank has been relaxing restrictions on foreign exchange as they seek to improve the ease of doing business in the Philippines. Such changes are also meant to encourage the public to transact with banks rather than the informal market.

Since 2016, dollars acquired through Philippine lenders may likewise be kept as dollar deposits at the banks and may be used to settle person-to-person transactions.