BANGKO SENTRAL SEEN TO DO STRESS TESTS ON BANKING SYSTEM

The Bangko Sentral ng Pilipinas( BSP) is expected to do a stress test on the country's banking system in light of the economic fallout from the Covid 19 pandemic.

Principally, the stress test should subject each of the banks on several recovery prospects, whether the economic recovery could be V shaped, or the slow U shaped recovery or the double-dip W scenario, according to a banker interviewed by The Financial District.

Before the Covid 19 pandemic hit, the banking system was awash with cash with capital adequacy ratios above the 10 percent Bangko Sentral ng Pilipinas regulation. Also, most of the banks were posting double-digit profits because of the robust economy.

However, with the economic malaise that Covid 19 pandemic brought on the economy, like the quarantine imposition that resulted in numerous losses for many industries, the BSP is expected to do a stress test , much similar to what the Federal Reserve Board in the US has done.

Meanwhile, the banking system has been setting aside big loan loss provisions than before due to the losses expected from corporate and individual borrowers as a result of the pandemic.