FSCC flags risks, says banks remain resilient

The Financial Stability Coordination Council flagged key risks to the Philippine financial system but said the banking sector remains resilient after its quarterly meeting at the Bangko Sentral ng Pilipinas head office in Manila on May 20, 2026.

The council cited the ongoing Middle East war, vulnerabilities in corporate debt, and rising household debt as risks that require close monitoring.

On the Middle East conflict, the FSCC said a prolonged war in the region could push oil prices higher.

The council said the conflict could also weaken market sentiment, tighten financial conditions, and drag on both global and domestic growth.

“Geopolitical risks remain a key source of uncertainty. We are watching global developments closely to spot and address potential systemic risks,” said BSP Governor and FSCC Chairman Eli M. Remolona, Jr.

The FSCC also flagged corporate debt exposures to energy- and interest-rate-sensitive sectors as areas to watch.

Higher energy costs and tighter financing conditions could raise debt-servicing burdens and compress firm margins, the council said.

Those pressures could affect bank asset quality if companies face difficulty meeting their obligations.

The council also said rising bond yields could lead to valuation losses on banks’ securities holdings.

If market pressures persist, the FSCC said these valuation losses may affect capital buffers.

On household debt, the council said regulators need to closely monitor borrowers’ ability to repay loans.

The FSCC said it remains alert as borrowing costs rise and debt levels for both household and corporate sectors continue to grow.

“We see pockets of vulnerability in energy- and interest-rate-sensitive sectors and in valuation pressures from higher bond yields. Nonetheless, the financial system remains on solid footing. Banks have adequate capital and liquidity buffers to absorb shocks and keep lending to households and firms,” Remolona said.

The council said it is also strengthening oversight of non-bank financial institutions.

These institutions include quasi-banks, investment houses, non-stock savings and loan associations, pawnshops, and trust corporations.

The FSCC said it is also working to improve how it monitors system-wide risks and interlinkages across the financial system.

The BSP says promoting financial stability is part of its mandate under Republic Act No. 11211, with the goal of strengthening the resilience of the financial system by managing systemic risks that could disrupt normal functioning.

The FSCC is an interagency council composed of the BSP, Department of Finance, Securities and Exchange Commission, Insurance Commission, and Philippine Deposit Insurance Corporation.