DOF says banking system healthy

The Department of Finance, Bangko Sentral ng Pilipinas (BSP), Bankers Association of the Philippines (BAP), and private sector bankers have given their assurances about the continuing stability of the Philippine banking system despite the recent failures of Silicon Valley Bank and Signature Bank, and fears of a global recession. Finance Secretary Benjamin Diokno and BSP Governor Felipe Medalla confirmed that the economy would not be affected by the collapse of Silicon Valley Bank. There is no reported exposure of Philippine banks to the US-based bank, and the Philippine banking system is sound and well-capitalized.

The BAP also believed that the collapse of the Silicon Valley Bank would have no substantial or material impact on Philippine banks. Philippine banks could weather economic shocks due to diversified deposit bases, good capital and liquidity ratios, and the ability to provide the liquidity needs of their clients. The BAP stated that banks in the Philippines continue to have capital and liquidity ratios that exceed the requirements set by the BSP.

The assurances came after the US banking and financial sectors experienced successive bank failures last week. Silicon Valley Bank became the second biggest bank to fail in US history, and customers began withdrawing deposits en masse amid fears about the bank’s financial health. Two days later, Signature Bank experienced a bank run, prompting state regulators to intervene. Moody’s Investors Service, a global ratings agency, also observed that banks in the Asia Pacific were unlikely to be hit by the spate of US bank failures, given their liquidity and funding sources.

Diokno had declared in late December that the “worst is over, and the best is yet to come.” The finance secretary believed that the Philippines could sustain a gross domestic product growth above the 6% mark, which could be among the highest in the region. The recent assurances from the Department of Finance, BSP, and BAP reflect the country’s strong banking system and its ability to withstand external shocks.

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