Big banks’ CAR slips to 15.07% in Q1

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THE capital adequacy ratios (CAR) of big banks under the more stringent Basel III Framework slipped in the first quarter of 2015 from a year earlier and the previous three months but remained well above the central bank’s regulatory threshold, the Bangko Sentral ng Pilipinas (BSP) reported.

The CAR of universal and commercial banks (U/KBs) slightly slipped to 15.07 percent as of end-March 2015 from 15.45 percent a year earlier, data released by the BSP showed.

Combined with that of their subsidiaries and quasi-banks, the equivalent CAR of U/KBs in the Philippines stood at 16.10 percent as of end-March 2015, lower than the 16.35
percent as of end-March 2014.

Compared with the quarter earlier, the CAR as of end-March also fell from their solo and consolidated ratios of 15.23 percent and 16.19 percent, respectively, in the fourth quarter of 2014.


The sector’s CAR is now measured according to the regulations of the Basel III regime, which took effect on January 1, 2014.

The central bank explained that the decrease was due to a slight reduction in the U/KBs’ qualifying capital brought about by a rise in capital adjustments related to investments in non-allied businesses.

“This increase in capital adjustments refers to specific exclusions that are no longer allowed. With this change, the capital position of banks can be better compared with the risk they take,” it stated.

Despite the decline, the latest CAR figures are well-above the central bank’s regulatory threshold of 10 percent and the international minimum of 8 percent.

“The industry’s capital position remains driven by Common Equity Tier 1 (CET 1), which is the highest quality among instruments eligible as bank capital,” the BSP said.

According to the BSP, The CET 1 of U/KBs represented 12.39 percent and 13.52 percent of risk weighted assets (RWA) on solo and consolidated bases at as of end March.

The Tier 1 ratios stood at 12.60 percent and 13.68 percent on solo and consolidated bases during the period. Tier 1 is composed of common equity and qualified capital instruments.

The central bank said the latest CAR figures indicate that U/KBs maintain sufficient buffer against unexpected losses that may arise during times of stress.

“A strong capital position promotes financial stability which is a key policy objective of the Bangko Sentral ng Pilipinas,” it said.

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