(Bloomberg) -- Philippine banks will recover faster from the impact of the coronavirus pandemic than they did from the Asian financial crisis due to record-low interest rates, higher capital and a stable economy, the head of the nation’s bankers group said.Lenders in the Southeast Asian nation may bounce back in three to four years -- about half the time it took after the 1997 crisis -- as banks aggressively provision for probable losses, said Cezar Consing, president of the Bankers Association of the Philippines.“This crisis might be more impactful on the economy, but the banking system at the same time is better able to handle some of the stresses,” he said in an online interview.The nation’s bad-loan ratio may peak at 6%-7% this year, Consing said, compared with about 4% in 2020, and far lower than the 20% levels seen during the Asian crisis. This would mean banks hold about 744 billion pesos ($15.5 billion) in bad debt out of a total of 10.63 trillion pesos of loans at the end of November.Consing, who is serving his final three months as president of Bank of the Philippine Islands before retiring, recalled that it took lenders about six to seven years to recover pre-crisis profits after the 1997 crisis.Deeper Economic ContractionIn Malaysia, strong asset quality and buffers that banks built up during the good times have helped prevent a financial crisis, Bank Negara Malaysia Deputy Governor Jessica Chew Cheng Lian said.“It was really top of mind for us to ensure that the pandemic does not evolve into a financial crisis, which would obviously lead to a much deeper and extended economic contraction,” Chew said via live-stream Monday from the Asian Financial Forum in Hong Kong.In the same way, above-minimum capitalization and ample provisions for bad loans are bright spots for Philippine banks, and most major lenders had coverage of over 100% in the third quarter, according to Rena Kwok, a Singapore-based analyst at Bloomberg Intelligence. Still, Kwok sees a slower economic recovery amid a resurgence in virus cases as a “downside risk.”The Bangko Sentral ng Pilipinas, like other central banks globally, has eased monetary policy and brought in other relief measures to limit the fallout of the pandemic. It cut reserve requirements for banks to encourage lending and help shore up cash in the financial system.The Philippine economy is expected to grow by 6.5%-7.5% this year, after a projected contraction of as much as 9.5% in 2020, according to latest government estimates.Other Highlights:Provisions for loan losses will remain elevated in 2021, but not as high as last year when they reached record levelsBanks can tolerate negative interest rates for up to a year. “If you have negative interest rates for long periods of time you’re creating bubbles, you’re creating problems, you’re mis-allocating resources.”While interest rates have fallen, other costs like regulatory, technology and cyber-security expenses have increasedPhilippine growth is very credit intensive, with a ratio of 1.50 pesos of new loans for every 1 peso of new economic output. “The fact that loan growth is flat at a time when GDP is going down, to me, is already something good.”A challenge for Philippine banks is how to become bigger and remain relevant to support the nation’s growth agenda. Banks now account for 12%-13% of the stock exchange compared with 15% a decade ago(Updates with Malaysia central bank deputy governor’s comments from sixth paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.