Big banks’ CAR improves to 15.94%

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Big banks’ overall capital adequacy under the Basel III Framework showed a slight improvement to 15.94 percent in the second quarter of 2014 from the level a quarter earlier, the central bank said.

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Consolidated with that of their subsidiary and quasi-banks, the equivalent CAR figure of universal and commercial banks (U/KBs) in the Philippines stood at 16.66 percent as of end-June 2014, data released by the Bangko Sentral ng Pilipinas (BSP) on Thursday showed.

The central bank noted that the latest CAR figures of the industry have advanced from the end-March 2014 ratios of 15.45 percent on the solo basis and 16.35 percent on the consolidated basis.

“The rise is due to the banks’ capital raising activities and earnings generated during the second quarter which enabled the industry to raise its qualifying capital by 7 percent quarter-on-quarter to P882.17 billion from P824.42 billion in end-March this year,” the BSP stated.

The sector’s capital adequacy is now reported according to the regulations of the Basel III regime, which took effect on January 1. The latest figure is not comparable to the industry’s CAR level a year earlier since the June 2013 ratios were calculated under the previous prudential regime of Basel II.

In addition, the central bank reported that the capital ratios of banks continue to surpass the regulator’s thresholds of 6 percent Common Equity Tier (CET) 1, 7.5 percent Tier 1 and 10 percent CAR.

“The strengthening of the industry’s capital base remains driven by Common Equity Tier 1 which represents the highest quality of bank capital,” it said.

According to the BSP, the CET1 ratio of U/KBs at 13.74 percent on solo basis (and 14.48 percent on consolidated basis) is well above the 6 percent regulatory minimum and the 2.5 percent capital conservation buffer that can be met only by CET1 capital.

Meanwhile, the banks’ Tier 1 ratios, which are composed of common equity and qualified capital instruments, stood at 13.96 percent and 14.65 percent on solo and consolidated bases.

The central bank said the CAR figures of the industry indicate that big banks continue to maintain adequate buffers against unexpected losses that may arise in times of stress.

“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,” it concluded.

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