Loan releases from banks’ foreign currency deposit units (FCDUs) slowed down in 2020 to $16.652 billion or 7.65 percent lower than the $18.032 billion in 2019 as principal repayments surpassed disbursements, the Bangko Sentral ng Pilipinas (BSP) said.

“The decline in FCDU loans may have resulted from tightened credit standards as well as lower working capital requirements due to the economic slowdown,” said the BSP. FCDUs and expanded FCDUs are a unit of a local bank or a foreign bank’s branch authorized to engage in foreign currency-denominated transactions.

On a quarter-on-quarter basis, FCDU loans decreased by 3.6 percent from end-September’s $17.266 billion. As for gross disbursements, this reached $13.9 billion or 13.9 percent higher quarter-on-quarter. Loan repayments, in the meantime, went up by 12.4 percent resulting to overall net repayments.

FCDU loan portfolio continued to be dominated by medium to long term debt or those with more than one year maturity, which is about 80 percent of total. This was slightly higher than end-December 2019’s 79 percent.

About 67 percent of outstanding loans were released to residents, of which 40 percent are loans to power generation companies with 17.9 percent of total. The rest of loans went to merchandise and service exporters or 14.2 percent, and 7.9 percent to public utility firms.

FCDU deposit liabilities last year amounted to $45.061 billion, up by 9.7 percent compared to 2019’s $41.090 billion. About 97.5 percent are by residents that the BSP said “essentially constituting an additional buffer to the country’s gross international reserves” which reached $110.117 billion as of end-December 2020.

There are currently 76 banks with FCDU authority.

Source: Manila Bulletin (