WHILE the Philippine financial system’s total resources reached a record P37.6 trillion as of May 2026 despite inflationary pressures and global uncertainty, the system should ensure that this growing pool of funds will be channeled into productive investments, micro, small, and medium enterprises (MSMEs) and job creation, according to experts.
Jonathan L. Ravelas, senior adviser at Reyes Tacandong and Co. explained that the 10-percent growth in the Philippine financial system’s total resources to a record P37.6 trillion is ‘a strong indication that the economy remains resilient despite pockets of inflationary pressure and global uncertainty.’
Looking ahead, however, Ravelas pointed out: ‘The key challenge now is ensuring that this growing pool of financial resources is channeled into productive investments, infrastructure, MSMEs, and job creation. Ultimately, the quality of how these funds are deployed will matter more than the size of the balance sheet itself.’
Ravelas emphasized the importance of picking quality over the size of the financial system’s balance sheet after data from the Bangko Sentral ng Pilipinas (BSP) showed that the combined funds and assets of banks (excluding the central bank) and non-bank financial institutions (NBFIs) climbed to a record P37.64 trillion as of end-May 2026, up 10 percent from the P34.22 trillion as of May 2025.
Data from the central bank indicated that this is the second straight month that financial resources posted a double-digit growth rate this year.
On a month-on-month basis, BSP data showed total resources held by the country’s financial system increased by 0.88 percent from the P37.31 trillion as of end-April 2026.
According to Ravelas, the primary drivers were ‘continued deposit growth, expanding bank lending, healthy remittance inflows, and rising economic activity, particularly through the universal and commercial banks that account for the bulk of the sector’s assets.’
‘More importantly, this tells us that liquidity remains ample and confidence in the financial system is intact,’ he said.
Ravelas said this could also mean households continue to save, businesses continue to invest, and banks remain in a strong position to finance growth.
For his part, Michael L. Ricafort, chief economist at the Rizal Commercial Banking Corporation (RCBC) said the 10 percent year-on-year growth for the Philippine financial system’s resources could be attributed to ‘some hedging and front-loading of purchases/imports that are funded by bank loans/credit before inflation rates for various products go up further.’
He explained that financial resources are also being pooled in advance within the financial system before borrowing costs go up further which he described as ‘a matter of prudence.’
Breakdown of total resources
BSP data showed banks accounted for the bulk, or 82.13 percent of total resources, while NBFIs held the remaining 16.86 percent share.
Resources held by banks climbed 10.85 percent to P31.29 trillion from P28.23 trillion in May 2026.
Broken down, universal and commercial banks (UKBs) continued to dominate the sector, holding 92.72 percent of total banking resources, or P29.01 trillion. This is higher by 10.72 percent from P26.20 trillion as of May 2025.
Thrift banks accounted for 4.76 percent of all resources in Philippine banks, at P1.489 trillion as of May 2026, posting a 10.95 percent increase from P1.342 trillion as of end-May 2025.
Resources of rural and cooperative banks also grew 8.10 percent to P587 billion as of May 2026, representing 1.88 percent of the banking system’s assets from P543.2 billion in the same period in 2025.
Ravelas emphasized that the fact that thrift, rural and cooperative banks also posted ‘solid gains’ suggests that ‘financial deepening is becoming more broad-based across the country.’
For the coming months, Ricafort said total resources growth could slow down amid possible higher interest rates locally and globally.
‘Also amid more cautious lending by banks to prevent further increase in bad loans amid slower global and local economy amid higher inflation and interest rates largely brought about by the adverse effects of the war in Middle East,’ added the RCBC’s chief economist.
Preliminary data from the central bank showed that the gross non-performing loans (NPLs) ratio climbed to 3.44 percent in May-the highest in nine months or since August 2025.
Data showed that the peso value of bad loans climbed to a new record high of P601.41 billion, which is 14.02 percent higher than the P527.449 billion recorded in end-May 2025.
BSP data also revealed that the ratio which measures the banks’ capacity to absorb losses from bad loans plunged to 88.92 percent-the lowest level in over four years or since March 2022.