Q2 2023 domestic claims of other financial corporations up by 19.2 percent year-on-year

Based on preliminary results of the Other Financial Corporations Survey, the domestic claims of the other financial corporations rose at an accelerated pace of 19.2 percent in Q2 2023 from the 12.2 percent year-on-year growth in Q1 2023.^[1]

In particular, the domestic claims of other financial corporations reached ₱8,609.9 billion in Q2 2023 from ₱7,222.7 billion in Q2 2022 (Figure 1).

The year-on-year growth in the other financial corporations’ domestic claims in Q2 2023 was due to higher claims on the depository corporations, the other sectors, and the central government.^[2]

In particular, the other financial corporations’ claims on depository corporations expanded significantly owing to the sector’s increased deposits in banks and holdings of bank-issued equity shares.

Likewise, the other financial corporations’ claims on other sectors, particularly the private sector, grew due to the sector’s higher investments in equity shares and debt securities issued by other nonfinancial corporations as well as the uptick in the loans extended to the households.^[3]

Meanwhile, claims on the central government expanded due to the other financial corporations’ increased holdings of government securities.

The net foreign assets of the sector grew by 51.0 percent year-on-year in Q2 2023, higher than the 20.8 percent recorded in Q1 2023. In particular, the net foreign assets increased to ₱348.4 billion in Q2 2023 from ₱230.7 billion in Q2 2022. Meanwhile, the sector’s other liabilities was higher from the previous year on account of the increase in its shares and equity issuances, combined with the expansion of its insurance technical reserves.^[4]

On a quarter-on-quarter basis, other financial corporations’ domestic claims grew at a slightly higher pace of 4.7 percent in Q2 2023 from 4.5 percent in the preceding quarter.

The expansion was primarily due to the rise in the sector’s claims on the private sector, coupled with the increase in its claims on the central government and depository corporations.

The higher claims on the private sector were mostly due to the other financial corporations’ increased investments in equity and debt securities issued by private nonfinancial corporations and amount of loans extended to households.

Likewise, the other financial corporations’ larger investments in government securities contributed to the rise in the sector’s claims on the central government. The increase in the sector’s claims on depository corporations was due to its higher deposits in banks and holdings of debt securities issued by other depository corporations.

The net foreign assets of the other financial corporations rose by 14.5 percent quarter-on-quarter from ₱304.3 billion as the sector continued to increase its investments in foreign-issued debt securities.

The said growth was, however, slightly slower than the 16.5 percent expansion posted in the preceding quarter. Meanwhile, the sector’s other liabilities increased due to higher shares and other equity issuances and the expansion of its insurance technical reserves from a quarter ago.

By component, claims on the other sectors, specifically the other nonfinancial corporations, comprised the bulk of the other financial corporations’ domestic claims in Q2 2023 (Figure 2). This is followed by claims on depository corporations, and the central government.

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^[1]   The Other Financial Corporations Survey is a comprehensive measure of the claims and liabilities of the other financial corporations. Other financial corporations refer to institutional units providing financial services other than banks, non-banks with quasi-banking functions, non-stock savings and loan associations, and the central bank. These institutional units are comprised of non-money market funds of trust institutions, trust corporations, and investment companies, private and public insurance corporations, holding companies, government-owned or -controlled corporations engaged in financial intermediation, and other financial intermediaries and auxiliaries.

^[2]  The other sectors is comprised of (a) state and local government, (b)public nonfinancial corporations (c)private sector^.

^[3] The private sector is composed of other nonfinancial corporations and other resident sectors. The other nonfinancial corporations refer to private corporations and quasi-corporations whose principal activity is the production of market goods or nonfinancial services. Meanwhile, other resident sectors comprise the households and non-profit institutions serving households.

^[4]   The insurance technical reserves are amounts set aside by insurance companies to meet future insurance liabilities, such as but not limited to unearned premiums, outstanding claims, expected losses, bonuses and rebates (for life insurance).