Banks’ capital level remains strong – BSP

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) reported yesterday the capitalization of big banks in the Philippines remained strong in the second quarter amid the implementation of the Basel III capital reforms.

Data from the BSP showed universal and commercial banks strengthened their capital adequacy ratios (CAR) to 15.48 percent and 16.42 percent on solo and consolidated bases at end-June from 15.07 percent and 16.10 percent in end-March.

The central bank explained the latest CAR figures are also above the 15.45 percent and 16.35 percent ratios registered in March last year, which is the maiden reporting period for universal and commercial banks under the Basel III framework. 

“This is an indication that the banks have adjusted to the impact of Basel III capital reforms,” the BSP said.

The full implementation of the Basel III capital standards in January 2014 was seen to temper capital levels. Other facets of Basel III reforms that have yet to complete and reinforce bank’s capital to mitigate the build-up of systemic risks include the ground rules on liquidity framework, counterparty risks, market risk and reforms on banks’ trading blocks.

The BSP said the Common Equity Tier 1 (CET1) of commercial and universal banks represented 12.87 percent and 13.89 percent of risk-weighted assets (RWAs) on solo and consolidated bases at end of the second quarter.

The Tier 1 ratios composed of common equity and qualified capital instruments rose to 13.06 percent and 14.05 percent on solo and consolidated bases in the second quarter of the year.

Banks were able to increase their qualifying capital by six percent to P973.6 billion in end June through capital raising activities and earnings generated in the second quarter.

The CAR figures are an indication of the universal and commercial banks’ continuous efforts to maintain adequate capital buffer against unexpected losses that may arise during times of stress. 

 “Well-capitalized banks are reflective of a resilient banking system that promotes financial stability, which is a key policy objective of the BSP,” the central bank added.