Forex volatility may affect foreign currency loans

Foreign exchange volatility may continue to result in a decline in loans granted by foreign currency deposit units of banks in the coming months, an economist said over the weekend.

Latest data from the Bangko Sentral ng Pilipinas showed that the outstanding loans granted by FCDU of banks in the first quarter fell 2.1 percent to $15.5 billion from the end-December 2022 level of $15.8 billion.

The BSP said the decline might be linked to lender banks’ tightened credit standards because of reduced tolerance for risk and uncertainty in economic outlook, reduced demand for FCDU loans of resident exporters, foreign exchange volatility and rising borrowing costs, and availability of other sources of funding.