Manila: The Philippine financial system remained stable last year but regulators should closely monitor risks, a report released by the Financial Stability Coordination Council (FSCC) said. The 2025 Financial Stability Report (FSR) highlighted the resilience of the country's banking sector, supported by strong capital, prudent regulation, and adequate loan loss provisions, along with a well-functioning payment system.

According to Philippines News Agency, FSCC Chair and Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr. emphasized the resilience of the Philippine economy and financial system, noting steady credit growth in line with economic activity, manageable borrowing levels, strong bank capitalization, benign inflation, and stabilizing interest rates. The report also pointed out the country's resilience to external shocks, backed by manageable external financing needs and ample reserve buffers.

While global and domestic risks persist, these have not resulted in a discernible weakening of the financial system or significant amplification of vulnerabilities. However, the report identified domestic credit dynamics and real estate market imbalances as potential risk sources, citing increased leverage across sectors, elevated property prices, higher lending to certain sectors including conglomerates, and the growth of unsecured consumer loans, primarily credit card debts.

Additional risks, such as cyber threats and geopolitical tensions, including the conflict in the Middle East, were also highlighted. Remolona underscored the need for vigilance and coordinated oversight among regulators to address these challenges. The FSCC suggested measures including activating a tool for banks to set aside additional capital during prosperous times, strengthening oversight of non-financial corporations, expanding data coverage for non-bank financial institutions, and operationalizing a systemic crisis management playbook.

The FSCC, an inter-agency council comprising the BSP, Department of Finance, Insurance Commission, Philippine Deposit Insurance Corporation, and Securities and Exchange Commission, issues the FSR annually to assess the health of the Philippine financial system in light of systemic risks.