The banking system continues to be resilient with the central bank fully equipped to fund facilities to help banks maintain healthy liquidity and capital positions.

Based on documents, the Bangko Sentral ng Pilipinas’ (BSP) special liquidity facility that were extended to banks were lower by almost P600 million last year to P4.15 billion, from P4.7 billion in 2008, and P5 billion in 2007.

This special fund, also called emergency loans, is given by the BSP both at normal periods for the purpose of assisting a bank under financial pressures, so long as the bank applying for the facility is not insolvent and has the assets to secure advances.

BSP Governor Amando M. Tetangco Jr. has said that the banking system continued to “manifest resiliency and strength.” He said credit quality for the system as a whole has been improving in terms of lower bad loans’ ratios while coverage ratios were generally increasing.

Tetangco said that despite the global financial turmoil, local banks’ capital adequacy ratio has remained “largely stable” at around 15.68 percent, higher than industry requirement of 10 percent.

In the first four months, the BSP’s emergency loan releases have amounted to P4 billion, according to a report.

BSP emergency loan releases are limited to 50 percent of a bank’s outstanding deposits and must be collateralized. The loans are released in two tranches and must be settled in full after 91 days but it may be extended for another three months after a Monetary Board approval.

There are two types of loans to banks. Based on BSP regulations and based on the central bank law, loans for liquidity purposes, which do not require collaterals, must be paid within seven days. But there are emergency loans that are released for national or local emergency to prevent financial crisis in the system, or crisis that directly threatens the banking industry.