MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) said yesterday the country’s thrift banks as well as rural and cooperative banks have enough capital to cover unexpected losses.
The BSP said the capital adequacy ratio (CAR) of stand-alone thrift banks (TBs) improved 4.24 percentage points to 22.31 percent in 2014 from 18.07 percent in 2013.
On the other hand, the CAR of rural and cooperative banks slipped 0.98 percentage points to 18.17 percent from 19.15 percent.
The central bank said the CAR of both thrift as well as rural and cooperative banks exceeded the 10 percent minimum regulatory ratio set under the Basel 1.5 capital framework.
“This indicates banks’ continued efforts to set aside sufficient buffer against unexpected losses that may arise in times of stress,” the BSP said.
The Basel 1.5 capital framework is a simplified version of Basel 2 in view of the simple operations of stand-alone banks. It took effect in January 2012.
The improvement in the CAR of thrift banks was due to the significant decline in risk weighted assets (RWAs) of P26.7 billion coupled with P800 million increase in capital.
The BSP said the merger and acquisition of two large thrift banks by universal banks resulted in the decrease in RWA, while the increase in capital was due to the robust net profits and additional capital infusion of a number of thrift banks.
On the other hand, the decline in the overall CAR of stand-alone rural and cooperative banks was attributed to the faster growth rate of RWAs versus that of total qualifying capital.
Under the broader banking reform agenda, the BSP continues to monitor the capital position of banks against their risk-taking activities.
“This is essential to fostering financial stability, which is a key policy objective of the BSP,” it said.
The BSP has further sweetened the incentives as well as financial package to encourage mergers and consolidations among rural banks through the Consolidation Program for Rural Banks (CPRB).
The CPRB would be available for a period of two years from the signing of the memorandum of agreement (MOA) containing the terms and conditions as well as other arrangements in implementing the program.