The Philippines' Financial Stability Coordination Council identified the ongoing Middle East war, corporate debt vulnerabilities and rising household debt as key risks to the financial system. It nevertheless found that banks remain resilient, with adequate capital and liquidity buffers to absorb shocks and continue lending. A prolonged Middle East conflict could raise oil prices, weaken market sentiment, tighten financial conditions and slow global and domestic growth. Higher energy and financing costs could strain corporate borrowers in energy- and interest-rate-sensitive sectors and affect bank asset quality, while rising bond yields could produce valuation losses and erode capital buffers if market pressure persists. The council is also monitoring households’ debt-servicing capacity and strengthening oversight of non-bank financial institutions and system-wide interlinkages.

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