Philippine financial system under pressure amid Middle East conflict FSCC - BusinessWorld Online

Towering high-rise buildings are seen in Makati City, April 10, 2026.— PHILIPPINE STAR/MIGUEL DE GUZMAN THE PHILIPPINE financial system is facing mounting pressure as vulnerabilities tied to corporate debt and rising household debt amid the Middle East conflict continue to test its resilience, the Financial Stability Coordination Council (FSCC) said.  In a statement following its latest quarterly meeting held last week, the interagency council noted that the local banking sector remains strong, but risks are emerging from the prolonged war in the Middle East.  “Geopolitical risks remain a key source of uncertainty,” Bangko Sentral ng Pilipinas (BSP) Governor and FSCC Chair Eli M.

Remolona, Jr.said on Monday.

The FSCC said the country may face higher oil prices, weaker market sentiment, tighter financial conditions, and slower economic growth if the Middle East conflict remains unresolved.In its latest semestral report on the Philippine financial system, the BSP noted that the Middle East war is expected to have limited direct impact on domestic banks, with the brunt likely felt in the industry’s operating environment. This is because the banking system ended 2025 with enough buffers to cushion the threats emerging from the energy crisis, it said.

However, the war could still push borrowing costs up and lead to higher household and corporate debt levels, the FSCC noted.The FSCC said corporates, particularly those exposed to energy and interest rate-sensitive sectors, could face higher debt servicing costs and narrower profit margins as energy prices rise, and financial conditions tighten.  This, according to the council, could weigh on banks’ asset quality.  “The Council also noted that rising bond yields could lead to valuation losses on banks’ securities holdings,” it added.

“If market pressures persist, this may affect capital buffers.”  Meanwhile, the FSCC told banks to keep watch of ho...