The Bangko Sentral ng Pilipinas (Philippine Central Bank) wants to assure the depositing public that the country's banking system will continue to be a dependable source of funds to support the economy's funding requirements in light of the turmoil occurring overseas.

The banking sector remains sound and stable, and that industry members are expected to deliver on their role of intermediating funds between depositors and borrowers, BSP Governor Amadeo Tetangco Jr. said in a statement released for an economic forum held yesterday.

The country's economic managers echoed the central bank chief's statement, adding that the country would still post a decent growth rate this year despite the unfavorable developments now happening abroad.

"Our economy faces many challenges, both from global and domestic [fronts].  The BSP is confident that...monetary policy has the necessary flexibility to respond to changes in our operating environment and that our banking system remains sound and stable, and able to efficiently intermediate funds under stressed conditions," Tetangco said in the statement.

The central bank governor served as one of the speakers at the economic forum organized by Security Bank.  It was held at the Makati Shangri-La Hotel.

Banks in the country are not only expected to remain profitable this year, they are also expected to lend out more to consumers and enterprises because of rising liquidity, Tetangco said.

The central bank earlier reported that the combined incomes of universal and commercial banks hit P83.4 billion last year, growing by 31 percent from the P63.7 billion seen the previous year.

Rising resources of banks would allow the institutions to lend more.  Bank lending last year grew by close to 10 percent.

According to Tetangco, credit is expected to expand this year due to the appetite of banks to extend more loans.

In the first quarter of this year, lending by the country's banking sector expanded by a faster pace of 12 percent year-on-year, bringing outstanding loans to P2.34 trillion, the BSP reported earlier.

Unfavorable developments abroad---particularly the escalating tension in the Middle East and North Africa, and the recent disasters in Japan---are expected to have spillover effects on other countries.

The political upheaval now happening in some oil-producing countries have pushed up oil prices since February.  The Philippines is greatly affected by these developments because it imports over 90 percent of its fuel requirements.

Moreover, the disaster in Japan is seen to dampen its demand for imported goods, thus weakening export income of the Philippines.  Japan is one of the biggest export markets of the Philippines. PDI, April 16,2011, p. B5-B6