Banks’ capital levels remain strong – BSP

The Bangko Sentral ng Pilipinas (BSP) reported yesterday the capitalization of big banks in the Philippines slipped in the fourth quarter but remained strong amid tighter capital requirements.

Data released by the central bank showed the capital adequacy ratio (CAR) of universal and commercial banks slipped to 14.91 percent on solo basis in end- December last year from 15.55 percent in end-September and to 15.78 percent on consolidated basis from 16.4 percent.

The BSP explained the riskweighted assets (RWAs) of big banks grew at a faster pace than their qualifying capital as a result of higher lending activity.

“The most recent capital figures indicate banks continue to set aside adequate buffers for their risk-taking activities. A robust capital position supports financial stability, which is a key policy of the BSP,” the central bank said.

The capital adequacy ratio of universal and commercial banks remains well above the BSP regulatory threshold of 10 percent and the international minimum of eight percent.

According to the BSP, banks’ capital base mainly composed of Common Equity Tier 1 (CET1) that represented 12.37 percent of RWAs on solo basis and 13.33 percent on consolidated basis.

The ratios, the BSP added, are more than twice the regulatory minimum of six percent.

Furthermore, the banking industry’s Tier1 ratio stood at 12.55 percent on solo basis and 13.48 percent on consolidated basis, exceeding the regulatory minimum of 7.5 percent.

The capital ratios increased amid the universal and commercial banks’ profitable operations and issuance of new shares as well as the infusion of foreign bank capital.

The full implementation of the Basel III capital standards in January 2014 was seen to temper capital levels.

The new Basel III regime incorporates adjustments to the treatment of bank capital in ways that enhance the use of the CAR as a prudential measure.

The country’s banking system continues to be resilient as it supports long-term economic growth. The banks’ balance sheets were marked by a steady growth in assets and deposits.