PH banks...

LCRs for certain currencies where they have significant activity as well.

The US dollar could be one such currency for many banks, other than the peso,” noted Fitch Ratings.

The LCR rule is aimed at strengthening the ability of individual banks to withstand short-term liquidity shocks.

It seeks to ensure that banks hold sufficient cash and other high-quality liquid assets to meet their liquidity needs – including potential deposit withdrawals – under a 30-day stress scenario.

“System liquidity is healthy in the Philippines, as evident in the reported banking system loan-to-deposit ratio of 70.7 percent and liquid assets-to-deposits of 53.5 percent at end-2015,” said Fitch Ratings.

“Banks' surplus funds are often invested in peso or US dollar- denominated Philippine government bonds, which would typically qualify as high-quality liquid assets under the LCR framework – for US dollar bonds as long as they back US dollar liabilities.”

In the meantime, Fitch Ratings said the three largest banks – BDO, Metrobank and BPI – will look more into expansion of branches to increase their retail deposits space. “This is likely to place further pressure on operating costs and weigh on profitability in the medium term – although profit growth should remain robust overall amid broadly- resilient economic conditions.

Some banks may also issue more long-term debt in order to lengthen their liability profiles and expand their LCR buffers.”

The BSP said for its part, industry simulations show that the big banks can readily comply with the new standard and that the new rule “promotes discipline in mitigating liquidity risks.”

The Basel 3 liquidity standards also include the requirement to put up a Net Stable Funding Ratio (NSFR) which the BSP is still reviewing for implementation.

An exposure draft is expected to be issued this year. The NSFR assess the liquidity requirements of banks for at least a year.

Domestic banks have been under Basel 3 rules and standards since it was first adopted in January 1, 2014 by the BSP, one of the first adopters of the reform package in the region.