The Central Bank of the Philippines reported that the Financial Stability Coordination Council, at its 20 May 2026 quarterly meeting, identified risks to the Philippine financial system from the ongoing Middle East war, vulnerabilities in corporate debt, and rising household debt, while assessing the banking sector as resilient. Banks were described as having adequate capital and liquidity buffers to absorb shocks and continue lending to households and firms. The council warned that a prolonged conflict in the Middle East could raise oil prices, weaken market sentiment, tighten financial conditions, and weigh on global and domestic growth. It also highlighted exposures to energy- and interest-rate-sensitive sectors, where higher energy costs and tighter financing conditions could increase debt-servicing burdens, compress margins, and in turn affect bank asset quality. Rising bond yields were identified as a source of valuation losses on banks' securities holdings that could pressure capital buffers. On household debt, the council said borrowers' repayment capacity requires close monitoring as borrowing costs rise and debt levels in the household and corporate sectors continue to grow. It is also strengthening oversight of non-bank financial institutions, including quasi-banks, investment houses, non-stock savings and loan associations, pawnshops, and trust corporations, and is working to improve monitoring of system-wide risks and interlinkages.
Central Bank of the Philippines2026-05-25
Central Bank of the Philippines says Financial Stability Coordination Council flagged Middle East and debt risks while judging banks resilient
The Central Bank of the Philippines said the Financial Stability Coordination Council has flagged risks from the Middle East war, corporate and household debt vulnerabilities, and rising bond yields, while assessing banks as resilient with adequate capital and liquidity. The council warned that a prolonged conflict could raise oil prices, tighten financial conditions, and strain energy- and interest-rate-sensitive sectors, affecting bank asset quality and borrowers’ repayment capacity. It is also strengthening oversight of non-bank financial institutions and monitoring system-wide risks and interlinkages.