Banks remain well capitalized – BSP

MANILA, Philippines - Universal and commercial banks remained well-capitalized as of end-2013 despite a slight drop in their capital adequacy ratios (CAR) due to a rise in loans extended to firms, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

Big banks’ CAR stood at 16.50 percent on solo basis and 17.65 percent on consolidated basis as of end-December. These figures are lower than the 17.51 percent on solo basis and 18.62 percent on consolidated basis as of end-September last year.

“December CAR values are lower than those in September as qualifying capital did not match the rate of increase in risk-weighted assets (RWAs). The industry’s RWA increased by 5.69 percent on solo and 5.62 percent on consolidated bases due to a rise in the lending to corporates,” the central bank said.

“Qualifying capital, on the other hand, declined by 0.42 percent on solo basis and grew slightly by 0.12 percent on consolidated basis. This was mainly brought about by the redemption by some banks of unsecured subordinated debts classified as Lower Tier 2 capital,” the BSP added.

Banks redeemed the bonds as they were declassified as qualifying capital under new standards in Basel III, which was implemented last January. The central bank noted the decline in capital was partly offset by the banking industry’s healthy net profits and the issuance of Basel III-compliant capital.

Despite the decline, the big banks’ ratios continue to be well-above the BSP’s mandated 10-percent requirement and the international benchmark of eight percent.

At the same time, Tier 1 or high quality capital of universal and commercial banks stood at 15.37 percent and 15.82 percent on solo basis and consolidated basis, respectively.

“The industry’s CAR figures indicated universal and commercial banks’ continued efforts to maintain robust capitalization,” the central bank said.

“A strong capital position promotes financial stability by providing individual banks and the industry with an adequate buffer against unexpected losses that may arise during times of stress,” the BSP added.