The Financial Stability Coordination Council (FSCC) held its quarterly meeting at the Bangko Sentral ng Pilipinas (BSP) head office in Manila on May 20, 2026. The council identified several risks to the Philippine financial system while affirming that the banking sector remains resilient.
Key Risks Identified
The FSCC highlighted three major risk areas: the ongoing Middle East war, vulnerabilities in corporate debt, and rising household debt. Regarding the Middle East conflict, the council warned that a prolonged war could push oil prices higher, weaken market sentiment, tighten financial conditions, and drag on both global and domestic growth.
"Geopolitical risks remain a key source of uncertainty. We are watching global developments closely to spot and address potential systemic risks," said BSP Governor and FSCC Chairman Eli M. Remolona, Jr.
Corporate Debt Concerns
On corporate debt, the FSCC flagged exposures to energy- and interest-rate-sensitive sectors as areas to watch. Higher energy costs and tighter financing conditions could raise debt-servicing burdens and compress firm margins, potentially affecting bank asset quality. The council also noted that rising bond yields could lead to valuation losses on banks' securities holdings, which may impact capital buffers if market pressures persist.
Household Debt Monitoring
Regarding household debt, the FSCC emphasized the need to closely monitor borrowers' ability to pay loans. The council remains alert as borrowing costs rise and debt levels for both households and corporations continue to grow.
"We see pockets of vulnerability in energy- and interest-rate-sensitive sectors and in valuation pressures from higher bond yields. Nonetheless, the financial system remains on a solid footing. Banks have adequate capital and liquidity buffers to absorb shocks and keep lending to households and firms," explained Governor Remolona.
Strengthening Oversight
The FSCC is also strengthening oversight of non-bank financial institutions (NBFIs), including quasi-banks, investment houses, non-stock savings and loan associations, pawnshops, and trust corporations. The council is working to improve how it monitors system-wide risks and interlinkages.
The FSCC is composed of the BSP, Department of Finance, Securities and Exchange Commission, Insurance Commission, and Philippine Deposit Insurance Corporation.
