Page 265 - Special Topic Session (STS) - Volume 3

STS543 Veronica B. B. et al.
capital adequacy (gap relative to the regulatory threshold). Moreover,
monetary policy tightening complements tightening of prudential policies in
restraining growth of real bank loan commitments. Meanwhile, real exchange
rate appreciation reacts to tightening of prudential measures.
Fourth, in general, restricting prudential measures limits risk-taking
activities by banks. The results show the negative impact of tightening
domestic macroprudential measures on non-performing loans relative to total
loans. Meanwhile, the results reveal that the impact of both business (output
gap) and financial cycles (credit-to-GDP ratio) on the movements of NPL ratio
are positive and significant. However, when prudential measures are adopted,
the impact on the NPL ratio becomes negative.
In general, the results are consistent with analysis that despite the relative
6
rise in the level of bank loan portfolio, banks have been more risk-sensitive ,
although the level of bank loan portfolio is not the focus of these estimations.
Moreover, the response of the growth of NPL to shocks to growth in TLP
appears to be modest, highlighting that growth in NPL remains stable amid
growth in TLP.

4. Conclusion
This study examined the effectiveness of changes in a comprehensive
measure of domestic prudential policies in restraining the growth of real loan
commitments of U/KBs and TBs to borrowers for new purchases of residential
property and riskiness of these banks’ loan portfolio using panel data
regression from the first quarter of 2014 to the fourth quarter of 2017. There
are improvements that the study intends to pursue moving forward. From the
technical point of view, the study intends to explore the use of aging of non-
performing loans of U/KBs and TBs in assessing the extent of the risk-taking
activities by banks and to examine the impact of domestic macroprudential
policies on net interest margins of banks. Moreover, the study aims to use
difference-in-difference analysis to check the robustness of results and to
assess the effects of domestic macroprudential policies on the supply of loan
in greater detail.
The use of credit registry data will be a future research area to assess the
impact of domestic macroprudential policies on household and firm credit
risk. Matching firm balance sheet information with credit registry data could
help us to fill this gap. The approval into law of the creation of a Credit
Information System on 31 October 2008 known as Republic Act No. 9510, “An
Act Establishing the Credit Information System and for other purposes” and
the establishment of the Credit Information Corporation (CIC) to address the

6 See Cachuela, Rafael Augusto (2018). Technical Box Article: “Does Expansion of Bank Lending Leads
to Weakening of Loan Quality in the Philippines”, Status Report on the Philippine Financial System, First
Semester 2018. Bangko Sentral ng Pilipinas.

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