NEWSFLASH

---

1998 BAD YEAR FOR BAD LOANS

Manila, May 4, 1998 - The banking systems' non-performing or sour loans may reach as high as 15% of total lending portfolio this year, making the problem as serious as the 1983 financial crisis after the death of Senator Ninoy Aquino.

The Bangko Sentral ng Pilipinas, however, quickly denied the high estimate of a banking source, saying the bad loans could reach only 7% of the banking system's total portfolio.

Hong Kong and Shanghai Banking Corporation senior vice president for treasury Mark Boyne said the country's level of non-performing loans may reach 10-15% this year due to adverse economic conditions that render some businesses incapable of paying back their debts on time.

However, he added that at 15%, the sourced loans of banks will not in any way threaten the stability of the Philippine banking system.

"It is not an alarming level. Banks will not be threatened by insolvency. There will be no risk in the financial system and banks," Boyne said.

For small banks, though, the rise in the level of bad loans would likely hit their operations.

"Smaller banks will have the risk," Boyne warned.

---