'Cascading effect' feared for domestic banks

While closer ties to large conglomerates provide Philippine banks with ample capital and lending opportunities, these direct connections also increase lending risks within the groups, and financial distress at the conglomerate level could have a profound impact on the banks.

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"Financial distress in a conglomerate could have a cascading effect on its subsidiaries, including the banks they own; this would amplify shocks and lead to broader financial instability," the debt watcher Moody's Ratings said in a report about the double-edged effect of Philippine banks' ties with conglomerates.

This report, published on Wednesday, June 19, revealed the interlinking of Philippine conglomerates with their subsidiaries, including banks. It featured several parent groups, such as Ayala Corporation (linked to the Ayala family), JG Summit Holdings (Gokongwei family), House of Investments (Yuchengco family), GT Capital (Ty family), SM Investments (Sy family), Aboitiz Equity Ventures (Aboitiz family), and LT Group (Lucio Tan).