PH’s public companies are financially sound – SEC

The country’s corporate regulatory watchdog gave an assurance that even with the increased global market volatility, listed companies that are based here in the Philippines are still financially sound with enough capital, albeit slightly down, to withstand external risks.

Securities and Exchange Commission (SEC) said over the weekend that companies, especially trading participants (TPs) of the Philippine Stock Exchange (PSE), remain compliant with the risk based capital adequacy (RCBA) requirements mandated by Commission’s regulations.

RCBA demonstrates the strong financial resiliency of the TPs amid the recent sharp volatility in the prices of PSE listed stocks.

Pertaining to the minimum required liquid reserves to protect firms, investors, and the economy as a whole, RCBA ensures that the broker dealers have enough capital to sustain operating losses while maintaining a safe and efficient market.

The TPs of PSE are required to comply with several RBCA requirements such as maintaining a minimum RBCA ratio of 110 percent; minimum Net Liquid Capital (NLC) of 5-million or 5 percent of Aggregate Indebtedness (AI), whichever is higher; maximum AI to NLC ratio of 2,000 percent; and minimum Unimpaired Paid-Up Capital (UPC) of either 100 Million for TPs who registered after the effectivity of the Securities Regulation Code, and 30 million for TPs already existing before the effectivity of said law.

The RBCA ratio refers to the ratio of NLC to the total risk capital requirement (TRCR), which is the sum of the capital requirements for each of the various risk exposures of TPs, namely operational risk, credit risk, and position or market risk.

A review by SEC of the report of Capital Markets Integrity Corporation (CMIC) indicated that among the 132 TPs that filed their RBCA reports as of end of 24 August 2015, a total of 98 TPs suffered decrease in their Net Liquid Capital due to the drop of PSE prices on said date.

It resulted in 67 TPs experiencing deterioration in their RBCA ratio and 22 TPs paring down their Unimpaired Paid-Up Capital due to paper losses in their proprietary investments.

The market decline also weakened 88 TPs due to an expansion in their Aggregate Indebtedness relative to Net Liquid Capital.

Nevertheless, all of these companies are still compliant of the RBCA.