Banks exposed to the real estate sector is under the watchful eyes of the Bangko Sentral ng Pilipinas, according to Finance Secretary Cesar Purisima, a member of the BSP’s policy-making Monetary Board.
The BSP is “closely monitoring” the banks, Purisima assured. “Right now, we believe it is still within manageable levels.
“As of end-December 2011, the combined exposure to the real estate sector of universal and commercial banks (U/KBs) and thrift banks (TBs) breached the half trillion mark and reached the highest level at P518.6 billion,” the BSP earlier said.
The exposure expanded by 6.8 percent from the third quarter of last year, when the level was at P485.6 billion, but compared to end-2010 figures, the expansion was 19.6 percent from P433.6 billion.
“Additional exposure during the quarter came exclusively from real estate loans, which grew by 7.2 percent to P505.9 billion. By industry, a significant portion of the exposure was held by U/KBs at 76.7 percent (P397.6 billion) share while the remaining 23.3 percent (P121.0 billion) was accounted for by the thrift banks,” the BSP added.
In an Asian Development Bank (ADB) forum–“How Can Asia Respond to Global Economic Crisis and Transformation”–Columbia University economist Jeffrey Sachs said short-term management of the real estate sector would be a challenge.
“It is a delicate balance between creating bubbles which is a tendency to turn on the liquidity, when there is a slowdown,” said Sachs.
“Asia needs to make sure that its own banks are not creating their own bubbles… Banks are very important but they run away given any leeway at all. They are gambling with other people’s money, paying the short-term benefits, leaving the long-term losses,” he also said.
Even the advanced economies of Japan, Europe and the United States had difficulties in spotting bubbles and addressing them, said ADB president Haruhiko Kuroda.
“I felt that a lot of lessons can be learned from the experiences of the United States, Euro zone and Japan. Those economies have attained significant development. Still, they made many mistakes,” Kuroda said during the forum.
Professor Takatoshi Ito of the University of Tokyo said the Asia Pacific region must identify the possible sectors that are vulnerable to a bubble.
“We must avoid the bubble to avoid economic shocks,” he said, citing that such event can lead to a catastrophe.
To avoid such fiscal crisis and its following repercussions, the professor said the economies should be “resilient to natural disasters and domestic shocks.”
A country that would not be able to contain its domestic shocks may have a negative spill over across the region, he said. —VS, GMA News
source: gmanetwork.com
