BSP may revise banks’ minimum capital reqm’t

MANILA, Philippines - The Bangko Sentral ng Pilipinas may revise the minimum capital requirements of banks as part of reforms meant to ensure financial stability in the country.

“The last time that the regulator increased minimum bank capital was 14 years ago... It’s under review right now as the balance sheets of the industry has grown fivefold in the last 14 years,” BSP Assistant Governor Johnny Noe E. Ravalo said during the Punongbayan & Araullo Banking forum yesterday.

“We are reviewing everything on the table because the intention is to ascertain whether the risk exposures taken by the banks today are commensurate to the structure of their balance sheet,” he said.

Based on the Manual of Regulations for Banks, the minimum capital for universal banks stands at P5.4 billion, while that for commercial banks is P2.8 billion.

The minimum capital for thrift, rural and cooperative banks, meanwhile, vary depending on the location of their head offices.

“At this point, we don’t know what the changes would be, the board is aware that it has been 14 years so we’re doing the review,” Ravalo said.

Ravalo further said the review includes the composition of capital, as well as the capital of foreign banks operating in the country.

“For the rest of the industry, it is a question of trying to put in place a risk governance framework that applies to the risks in the market today and part of that is not just the pure capital, the number, part of that is really what needs to be done to move the markets forward,” Ravalo said.

At the same time, Ravalo said more reforms under the Basel 3 are set to be implemented by the central bank.

He stressed the BSP is set to release guidelines on the leverage ratio within this year and measures on liquidity standards by first quarter of 2014. The framework for domestic systematically important banks and counterparty risks, meanwhile, are being reviewed by the central bank.

Basel 3 is a comprehensive set of reform measures meant to strengthen the regulation, supervision and risk management of banks.

Higher capital adequacy standards under the Basel 3 are set to be implemented starting January 2014.

Nestor V. Tan, BDO Unibank Inc. president, said the banking industry’s concern with regard to the reforms is the implementation method.

“We support the objectives and principles of Basel 1, 2, and 3. What we are concerned about is the manner with which it is implemented and the degree by which banks are required to comply with it,” Tan said.

“So we’re not against all of these risk prevention measures but what we are concerned about is we need to make sure that we implement it in such a way that we still have a thriving industry,” he continued.

Antonio C. Moncupa, Jr., meanwhile, said that despite being costly, the reforms would eventually increase the profits of banks while preventing any risks to the health of the banking system.

“While profit is not a target, it is in fact, financial stability, inevitably all these reforms would reflect on the profitability of the banking system,” Moncupa said in the same forum.