Pandemic Aftermath May Push Banks, Big Borrowers Into Debt Restructuring

The full extent of the coronavirus pandemic-inflicted damage on Philippine companies and the local financial system will only begin to manifest itself over the next couple of years, as there is always “a lag time before you see the dead bodies,” reported. As such, banks and their large corporate borrowers will likely need to enter into contentious and difficult negotiations in the medium term to rehabilitate loans that would otherwise go into default as a result of the ongoing public health crisis. “[Banks’] problem loans have almost doubled in July. Was that the peak? Definitely not,” said Higinio “Joey” Macadaeg Jr. who is the managing director of newly inaugurated New Horizons Financial Consultants Inc. He pointed to the country’s experience during the 1997 East Asian financial crisis which saw the level of bad loans in the local banking system peak only in 2001 and 2002. Read more