Heavy borrowing by global artificial intelligence companies is pushing up Philippine bond yields and making it more expensive for local businesses to raise funds, potentially squeezing investment in the country, Bangko Sentral ng Pilipinas Governor Eli Remolona Jr. warned.
Speaking before the European Chamber of Commerce of the Philippines, Remolona said AI companies were shifting from equity markets to bond markets to finance massive infrastructure and technology spending, adding to competition for funds and driving up borrowing costs.
“They started to move away from the stock market and move to the bond market, which is affecting us because that means our yields are higher than otherwise,” he said. “They’re crowding out our investments.”
Higher global yields can feed into domestic borrowing costs, raising the hurdle for Philippine companies planning expansions and other capital-intensive projects.
Remolona also questioned whether the enormous sums being poured into AI would generate returns sufficient to justify the spending, recalling concerns over excessive investment during the dot-com boom of the late 1990s.
“The question we face is, are we now getting too bullish about AI?” he said.
Beyond the impact on financing costs, the AI boom presents a financial stability concern if banks become too exposed to companies whose valuations or business prospects may not hold up, the governor said.
He described Philippine banks as being in “pretty good shape,” citing a capital adequacy ratio of 15.6 percent and a liquidity coverage ratio of 155 percent.
The BSP has shifted toward more forward-looking supervision, using stress tests, requiring provisions for expected losses and closely monitoring institutions deemed systemically important.
Remolona said regulators also prepare emergency liquidity and bank-resolution measures to limit the fallout from a bank failure and prevent problems at individual institutions from spreading across the financial system.
