Pandemic to cause more loan defaults, but not as bad as 1997 crisis — BSP

Soured loans in the local financial system will rise due to the pandemic-induced recession, but the expected increase in borrower defaults will not be as severe as during the 1997 East Asian crisis.

BSP Governor Benjamin Diokno assured that the local banking system is well-prepared with buffers to handle potential worst-case scenarios for bad loans.

Diokno noted that banks recorded high capital adequacy ratios before the pandemic, with universal and commercial banking industry levels at 15.6% and 16%, respectively, against global standards of 10% and 8%. This indicates sufficient capital buffer to withstand unforeseen shocks.