According to the latest Senior Bank Loan Officers’ Survey (SLOS) from the Bangko Sentral ng Pilipinas (BSP), the majority of banks in the Philippines have largely maintained their lending standards for both businesses and consumers in the first quarter of 2025.
However, the central bank’s report also indicates some tightening of credit conditions, driven by concerns about borrower quality and bank profitability.
The BSP’s survey employs two methods to assess lending standards. *
The “modal approach,” which identifies the most common response from banks, showed that 81.8% of respondent banks kept their credit standards for businesses unchanged in the first quarter of 2025.
This is a slight decrease from the 83.3% reported in the previous quarter.
In contrast, the “diffusion index” (DI) approach, which measures the difference between banks that tightened and those that eased their standards, revealed that fewer banks reported tightening their lending policies in the first quarter compared to the previous survey. This suggests that while most banks held steady, there was still some movement towards stricter lending.
The central bank of Philippines noted that banks that did tighten their loan standards for enterprises cited a “deterioration in borrowers’ profile” and a decline in the “profitability of the bank’s portfolio” as key reasons.
* In the modal approach, the results of the survey are analyzed by looking at the option with the highest share of responses. The 3 options for the modal approach are either tightening, easing, or unchanged credit standards for loans to enterprises and for loans to households.
In the DI approach, a positive DI for credit standards indicates that the proportion of respondent banks that have tightened their credit standards exceeds those that eased (“net tightening”), whereas a negative DI for credit standards indicates that more respondent banks have eased their credit standards compared to those that tightened (“net easing”).
Meanwhile, an unchanged credit standard in the DI approach indicates that the proportion of the respondent banks that have tightened their credit standards is equal to those that eased their credit standards.
BSP report says household loans have seen some tightening
Looking ahead, the survey indicates that most banks expect to maintain their current stance. Specifically, 85.5% of respondents anticipate generally unchanged lending standards for businesses in the second quarter of 2025.
The survey also examined lending standards for households. In the first quarter of 2025, 86.8% of banks maintained their credit standards for household loans, down from 89.5% in the fourth quarter of 2024, according to the modal approach.
However, the DI method painted a slightly different picture, reflecting a “net tightening” of credit standards for household loans during the same period. The BSP reported that this tightening was driven by similar factors affecting business loans: a “deterioration of borrowers’ profile,” “reduced tolerance for risk,” and a decline in “the profitability of bank’s portfolios.”
For the second quarter of 2025, 82.1% of respondent banks anticipate that their standards for consumer loans will remain unchanged.
The results of the quarterly Senior Bank Loan Officers’ Survey (SBLOS) conducted by the BSP is meant to enhance its understanding of banks’ lending behavior, which is an important indicator of the strength of credit activity in the country.
Overall outlook
Design for the new BSP complex
While the majority of Philippine banks have maintained their loan standards, the BSP’s survey highlights some underlying concerns about borrower quality and bank profitability.
These concerns have led to some tightening of credit conditions, particularly for household loans. The central bank will continue to monitor these trends to ensure the stability and health of the country’s financial system.
In the end, the balancing act between supporting economic growth and safeguarding financial stability will be crucial in the coming months.