Big banks’ capital adequacy ratio settles at 15.94%

MANILA, Philippines - Universal and commercial banks have been able to increase their capitalization in the second quarter despite the stricter requirements under the Basel 3, the Bangko Sentral ng Pilipinas reported yesterday.

Big banks’ capital adequacy ratio settled at 15.94 percent on a solo basis as of end-June and at 16.66 percent on a consolidated basis. Both figures are higher than the end-March ratios of 15.45 percent on solo basis and 16.35 percent on consolidated basis.

The latest numbers are also well-above the BSP’s required 10-percent CAR for big banks.

These numbers are already computed against Basel 3, an updated set of reforms meant to strengthen the regulation, supervision and risk management of banks. The BSP has mandated big banks to implement new capital requirements during the start of the year, while other Basel 3 measures including leverage ratio, liquidity standards, and framework for domestic systemically important banks have yet to be carried out.

“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.

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.

These levels surpass the BSP’s requirement for banks to maintain a minimum Tier 1 capital of 7.5 percent, a minimum common equity Tier 1 (CET1) ratio of six percent, and a capital conversation buffer of 2.5 percent.

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 Bangko Sentral ng Pilipinas continues to monitor the strong capital position of banks in relation to their risk taking activities under the broader banking reform agenda. This is essential to fostering financial stability which is a key objective of the BSP.”