IFC to help Phl banks meet Basel III reqm’t

MANILA, Philippines - The International Finance Corp. (IFC) is prepared to enter into agreements with Philippine banks that need to raise Tier 1 and Tier 2 capital to meet the stiff requirements of Basel III international framework.

IFC director for East Asia and the Pacific Sérgio Pimenta said that one of the biggest challenges of Philippine banks up to next year is raising capital equivalent to at least 12.5 percent ratio from the existing eight percent.

The Bangko Sentral ng Pilipinas (BSP) has set a minimum capital adequacy ratio (CAR) of 10-percent, while the Bank of International Settlements (BIS) placed it at eight percent.

However, the full implementation of international risk-weighted Basel III frameworks reportedly raises the minimum CAR to 12.5 percent.

“Aside from dealing with the negative impact of the economic recession in the Eurozone and the slowing  economy, the Philippine banks must meet the challenge of Basel III capital requirements, and tightening of trade finance,” Pimenta said at the recent Asian Bankers Association (ABA) conference last week.

He told the assembly of some of the leading banks in the region that the IFC has extended Tier 1 and Tier 2 capital for 13 banks in the emerging market worth $81.4 billion. The amount came from the IFC Capitalization Fund which comes in the form of equity or subordinated debts.

“Of that amount $500 million was availed by banks in Asia, in Tier 1 capital or subordinated debts,” Pimenta added.

The most recent recipient of the IFC capitalization fund is the Rizal Commercial Banking Corp. (RCBC). The IFC acquired 7.2 percent equity in RCBC worth P2.1 billion (approximately $49 million).

The private investment arm of the World Bank also has equity exposures in BDO Unibank Inc. (BDO) and Planters Development Bank (Planterbank).

It has a risk-sharing facilities and guarantee agreement with the Bank of the Philippine Islands (BPI) for sustainable development of green projects.

“Since 2005, the IFC has supported global trade flows to the tune of $25 billion for the emerging market trade, including 13,000 guarantees. Last month, the IFC approved an additional $2-billion for trade financing with the possible increase up to $5 billion,” the IFC director added.

The guarantees of IFC’s trade finance program has reached over $20 billion since 2005, more than half of which went to the poorest countries.

Of the trade finance guarantees issued under the program, more than 80 percent benefited small and medium enterprises. More than 25 percent of commitments under the program supported farmers and agribusinesses.

In addition, its Global Trade Liquidity Program supported $21 billion in trade since it was launched in 2009. In FY2012, IFC’s commitments in the two programs totaled $6.1 billion, a 23 percent increase over fiscal year 2011.