Banking sector response to COVID 19

April 12, 2020

IMMEDIATELY following the announcement of a Luzon-wide lockdown, the banking sector saw a flurry of cash withdrawals.

BPI President and CEO Bong Consing described the situation in consecutive interviews with ANC’s Michelle Krystle Ong and Cathy Yang, thus: “These are very unique times. Cash in circulation is coming down because a lot of businesses are closed.

The whole cash cycle has changed. People are withdrawing cash. They are keeping it at home. Businesses might be withdrawing cash and keeping them in lock boxes somewhere. The whole cash cycle has changed. So the challenge is now to get enough cash into the branches and the ATMs.”

Industry-wide, about 30 percent of bank branches in Luzon remained open especially in key areas so clients don't have to go very far to meet their banking needs. As for ATMs, “95 of 99 percent are up.’

The pressure eased somewhat a couple of weeks later: …” but as the quarantine gets longer and longer the amount of cash being withdrawn from ATMs is coming down. So the need to replenish the ATMs with cash quickly is obviously becoming lower.”

Even in a worst-case scenario, Consing (who is also the President of the Bankers Association of the Philippines (BAP) dismissed any fears of a bank run or bank failures.

“There is no risk of a bank run. Absolutely none. The banks are in great shape…… (B)ank capital ratios in the Philippines are so high and they are so strong we can do to this indefinitely.

“The capital ratios of the banking system in the Philippines are in the 15s. There are so many buffers. The central bank has properly prepared banks for crises like this. This is not going to be a banking problem.

“They (the BSP) have lowered reserve requirements. They have lowered the cost of lending. They have made regulations easier. They are trying to make sure that the banks have the wherewithal to continue lending.”

Rising NPLs are a concern. “….(But) a bank like us is prepared to make no money, no money, and in some cases lose money, to do our part. I can only speak for BPI but I suspect a lot of other banks are going to try to do the same. We all realize we have to help out here. And if that means lower profits, so be it. If that means extended payment terms, so be it. We all have to do our share.”

BPI has announced a 30-day deferral of payments due from its consumer loan clients. Consing also announced a “special offer” for our frontline heroes in the fight against COVID 19.

“I want to use this opportunity to say that if you are a medical professional doing front line work, if you are a doctor, if you are a nurse, if you are a medical technologist, if you are a soldier, if you are a policeman, amidst this COVID 19 problem, we are giving you a 90-day deferral in payments. A 90-day deferral in payments. And here’s what’s important. We are giving you this 90 days interest-free. Feel free to use our money during this time. We admire what you are doing. We know it is a huge sacrifice. We know you are doing this at great risk to yourselves. This is the least we can do at this time. Use our money however it is. Don't worry about paying us for the next 90 days. Do what you are doing. We salute you at this time.”

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