FSCC says Philippine financial system resilient amid global risks

MANILA — The Philippine financial system remains capable of weathering shocks despite heightened geopolitical and market risks, the Financial Stability Coordination Council said following its 46th Executive Committee meeting at the Bangko Sentral ng Pilipinas head office in Manila on Sept. 2.

In a statement, FSCC Chairman and BSP Governor Eli M. Remolona, Jr. said, “Global risks remain elevated, with geopolitical tensions in the Middle East and volatile financial markets. Nonetheless, our financial system remains well-positioned to absorb shocks.”

The assessment matters to households and businesses because a financial system with sufficient capital, liquidity, and effective risk controls is better positioned to keep credit flowing during periods of stress and prevent financial shocks from disrupting savings, investments, jobs, and access to financing.

The FSCC said sound capital and liquidity positions, together with prudent risk management, continue to support the financial system and allow financial institutions to lend to households and businesses.

BSP data show resident loans for production and consumer purposes reached about PHP 16.99 trillion in July 2026, up 10.6% from a year earlier, while loans for production activities totaled about PHP 13.22 trillion and grew 9.7%.

The council said private-sector credit continues to expand at a steady pace, reflecting sustained household consumption and financing requirements among businesses.

Consumer lending remains an important source of domestic demand, providing households with financing for purchases and other needs.

Separate BSP data placed consumer loans at PHP 4.01 trillion as of end-June, equivalent to 23.12% of the banking system’s total loan portfolio excluding interbank loans. Nonperforming consumer loans accounted for 5.67% of total consumer loans during the period.

Corporate borrowing, meanwhile, reflects companies’ requirements for investments and working capital, according to the council.

Real estate remains the largest component of banks’ loan exposures, making the sector an important area for regulators to monitor because problems in property markets can affect borrowers, lenders, and the broader economy.

Overall asset quality remains stable, the FSCC said.

BSP banking statistics showed the Philippine banking system’s nonperforming-loan ratio at 3.43% in July, with resident nonperforming loans at about PHP 582.97 billion against total resident loans of about PHP 16.99 trillion.

The banking system also maintained capital buffers, with its consolidated capital adequacy ratio at 15.59% as of end-June, according to BSP data.

Even with those buffers, the FSCC said it is taking additional steps to identify emerging vulnerabilities earlier and strengthen the financial system’s ability to manage potential shocks.

One measure involves enhanced monitoring of non-bank financial intermediaries to support their sound and sustainable development.

The council is also improving data collection and information sharing among its member agencies to provide regulators with a clearer view of risks developing across different parts of the financial system.

The FSCC is strengthening assessments of liquidity, leverage, concentration, interconnectedness, and the linkages among banks, non-bank financial intermediaries, corporations, and financial markets.

The council also conducts its Survey of Salient Risks annually to identify threats that could affect the financial system over the next 12 to 24 months and over the next three to six years.

The survey, which began in 2025, draws responses from universal and commercial banks, rural and cooperative banks, thrift banks, other BSP-supervised financial institutions, non-bank financial institutions, non-financial corporations, government agencies, insurance companies, and the academe.

In the latest survey conducted in July 2026, respondents identified geopolitical tensions, cyberattacks, and disruptions in global supply chains as key risks requiring close monitoring.

Early detection of such threats is important because it gives regulators, financial institutions, and other market participants more time to reinforce safeguards, improve contingency arrangements, and reduce the potential effects of financial shocks on households and businesses.

“The FSCC aims to proactively address risks through close monitoring, timely information sharing, and robust coordination among its members,” explained Governor Remolona.

The FSCC brings together the BSP, Department of Finance, Insurance Commission, Philippine Deposit Insurance Corporation, and Securities and Exchange Commission to coordinate the monitoring and management of systemic risks in the Philippine financial system.