MANILA — Overall systemic financial risks in the Philippines remain moderate and broadly unchanged from last year, with the banking system continuing to show strength despite some lingering vulnerabilities, according to a report by the International Monetary Fund (IMF).

The IMF said the country’s banking system is well-capitalized, liquid, and profitable, supported by conservative lending practices and a stable deposit base. Credit growth remains healthy, and the “credit gap remains closed,” indicating a financial system that has so far absorbed domestic and external shocks without major strain.

However, the IMF highlighted vulnerabilities in the real estate and household sectors. “Commercial and residential vacancy rates remain persistently high in some regions and segments, reflecting still-elevated mortgage rates, supply overhang from the pre-pandemic construction boom and the exit of Philippine offshore gaming operators (POGOs) in Metro Manila,” the report said.

Despite these challenges, residential real estate prices and loan growth have remained resilient, though the residential real estate non-performing loan ratio reached 6.4 percent as of end-June 2025. Household debt also remains an area of concern due to growth in real estate loans, bank credit card and salary loans, and expanded credit access through non-bank financial institutions (NBFIs) and digital finance.

The IMF further noted risks stemming from banks’ exposure to the public sector, lingering corporate weaknesses, weak earnings in the manufacturing sector, and potential impacts on wholesale and retail loans, which account for roughly 19 percent of domestic loans as of end-August 2025. Interconnectedness between banks and corporates through complex conglomerate structures may amplify these risks.

Non-bank financial institutions, while relatively small, have expanded lending to include real estate, consumer loans, and micro, small, and medium-sized enterprises, some of which remain outside the supervision of the Bangko Sentral ng Pilipinas (BSP).

The IMF recommended strengthening the country’s macroprudential policy framework. It noted that the BSP is developing tools and refining the countercyclical capital buffer with IMF assistance, and advised accelerating these efforts to ensure timely calibration of policies as monetary easing and investment growth increase credit demand. The IMF also suggested replacing the cap on commercial real estate exposures with a sectoral systemic risk buffer to better capture broader risks.

Regarding emerging risks, the IMF said the expansion of crypto-asset adoption requires robust regulation. The BSP has extended its moratorium on new licenses for virtual asset service providers indefinitely and is exploring the use of a wholesale central bank digital currency for government bond settlements and cross-border payments, with IMF technical assistance.

Authorities said financial vulnerabilities remain well-contained. BSP stress tests confirm that banks have sufficient capital buffers to absorb potential asset quality deterioration. The central bank also noted ongoing efforts to monitor consumer credit from entities outside its supervisory scope, including a proposed bill to transfer the national credit bureau to the BSP.

On crypto assets, authorities noted their primary use remains for remittances and investment. Anti-money laundering and counter-terrorism financing risk assessments for virtual assets will be incorporated into the ongoing national AML and CFT assessment.