Phl banks have enough capital to meet int’l requirements

MANILA, Philippines - The country’s universal and commercial banks have enough capital to meet requirements under the Basel III guidelines, a Bangko Sentral ng Pilipinas official said over the weekend.

“We’ve simulated this, and the system as a whole will comfortably pass the requirements of Basel III,” BSP Assistant Governor Johnny Noe E. Ravalo told a forum.

Ravalo was referring to simulation done by the banks themselves and another by the central bank to see if the universal and commercial banks will be able to comply with the higher capital requirements under Basel III, a set of global banking standards.

But since both yielded positive results, Ravalo said “we don’t expect a systemic response to capital requirements.”

Basel III is an updated set of reform measures meant to strengthen the regulation, supervision and risk management of banks. Universal and commercial banks are set to comply with the capital adequacy standards under the new guidelines starting January next year.

Ravalo said that under the country’s implementation of Basel III, a capital adequacy ratio of 10 percent has been kept. The same level is being mandated for banks under the Basel II, he noted.

At the same time, big banks’ Tier 1 capital should stand at 7.5 percent of their risk weighted assets, while minimum common equity Tier 1 should be six percent.

Since the capital conservation buffer of 2.5 percent is added to the minimum common equity Tier 1, common equity Tier 1 should stand at 8.5 percent.

“Under the Basel accord, if you don’t meet the requirements, the regulator has power to withhold dividends,” Ravalo said.

The BSP is working on other reforms under the Basel III such as leverage ratio, liquidity standards, framework for domestic systematically important banks and counterparty risks, Ravalo said.

He said other improvements under the Basel III will include measures on financial market infrastructure, trading books and securitization exposure, and over-the-counter (OTC) derivatives.