BSP sets rules for banks seeking capital relief

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) has issued reporting guidelines for banks and quasi-banks that plan to avail themselves of temporary capital relief on valuation losses from peso government securities amid market volatility triggered by the Middle East conflict.

In a memorandum, the BSP said covered entities must notify the central bank and submit additional capital adequacy ratio (CAR) reports if they intend to use the relief.

The relief allows banks and quasi-banks to temporarily exclude certain unrealized losses on peso government securities measured at fair value through other comprehensive income (FVOCI) from the computation of their regulatory capital.

The measure was introduced to prevent temporary market swings from unduly weakening banks’ reported capital positions, particularly as the Middle East conflict affected market yields and asset valuations.

Under the latest memorandum, a bank or quasi-bank that intends to avail itself of the relief must submit an email notification to its supervising department, copy furnished to the BSP’s Capital Markets and Trust Supervision Department, on or before June 30.

The notification must include the entity’s February 2026 solo CAR report and the corresponding control prooflist detailing net unrealized gains or losses on peso government securities under the FVOCI portfolio.

Only banks and quasi-banks that have availed themselves of the BSP-approved regulatory relief are required to submit the monthly CAR report.

The monthly report will cover the period from April 30 to Dec. 31. For the reporting periods ending April 30, May 31 and June 30, the deadline for submission is July 15.

For the reporting periods from July 31 to Dec. 31, the monthly CAR report must be submitted within 10 banking days after the end of the reference month.

The BSP said all report submissions must comply with existing reporting standards. Only files prescribed by the central bank will be accepted and validated.

Reporting violations may be subject to applicable penalties under the Manual of Regulations for Banks and the Manual of Regulations for Non-Bank Financial Institutions.

The issuance follows the BSP’s earlier move to grant temporary regulatory relief to banks and quasi-banks to cushion the impact of unrealized or paper losses on peso government securities during the relief period.

Beginning Jan. 1, 2027, banks and quasi-banks will revert to the usual capital rules, which require unrealized mark-to-market losses on covered securities to be fully reflected in the computation of capital ratios.