Banks' capital adequacy ratio up in Q2

MANILA, Philippines (Xinhua) - Philippine universal and commercial banks hiked their capitalization in the second quarter amid stricter regulations on capital buffers against potential losses, the local central bank said today.

The Bangko Sentral ng Pilipinas (Philippine central bank or BSP) said big banks' capital adequacy ratio (CAR) settled at 15.94 percent on solo basis and at 16.66 percent on consolidated basis as of end-June. Both figures are higher than the end-March ratios of 15.45 percent on solo basis and 16.35 percent on consolidated basis.

The end-June figures are also well-above the BSP's required 10- percent CAR for big banks.

"The strengthening of the industry's capital base remains driven by Common Equity Tier (CET) 1 which represents the highest quality of bank capital," the BSP said in a statement.

The CET1 ratios of the big banks stood at 13.74 percent of risk- weighted assets on solo basis and 14.48 percent on consolidated basis. Their Tier 1 ratios, meanwhile, reached 13.96 percent on solo basis and 14.65 percent on consolidated basis.

The BSP said the increase in capital buffers is a product of the banks' capital raising activities and earnings gained during the second quarter.

"The CAR figures of the industry indicate that (big banks) continue to maintain adequate buffer against unexpected losses that may arise in times of stress," the BSP said.

The Philippines implemented stricter rules on capital under international Basel III standards at the start of the year.

Under Basel III, debt securities issued by banks, which qualified as a lower kind of capital that could augment their CARs under previous rules, were no longer recognized by regulators. The new rules prescribed that if banks want to continue issuing debt securities, these notes need to have loss-absorbency features to make them act more like real equity capital.