Big banks’ end-2015 CAR slips to 14.9%

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The capital adequacy ratios (CAR) of big banks under the more stringent Basel III Framework slipped at end-2015 from a year earlier, but remained above the central bank’s regulatory threshold of 10 percent and the international minimum of 8 percent.

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The CAR of universal and commercial banks (U/KBs) fell to 14.91 percent as of end-2015 from the 15.23 percent recorded in the same period in the previous year, the Bangko Sentral ng Pilipinas (BSP) reported Tuesday.

Combined with their subsidiaries and quasi-banks, the equivalent CAR of U/KBs in the Philippines stood at 15.78 percent as of end-2015, lower than the previous year’s 16.91 percent.

Despite the decline, the latest CAR figures were above the Bangko Sentral ng Pilipinas’ regulatory threshold of 10 percent and the international minimum of 8 percent.

Compared with the quarter earlier, the CAR as of end-2015 decreased from their solo ratio of 15.55 and from their consolidated ratio of 16.40 percent.

Explaining the lower capital ratios of big banks during the period, the BSP said their “risk-weighted assets [RWA] grew at a faster pace than their qualifying capital amid the banks’ increased lending activities.”

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

“The banks’ capitalization remains mainly composed of Common Equity Tier 1 (CET 1), the highest quality among instruments eligible as bank capital,” the central bank said.

The CET 1 of U/KBs represented 12.37 percent and 13.33 percent of RWA on solo and consolidated bases as of end-December.

Tier 1 ratios stood at 12.55 percent and 13.48 percent on solo and consolidated bases, respectively, during the period. The Tier 1 is composed of common equity and qualified capital instruments.

Both CET 1 and Tier 1 ratios of big banks were also above the BSP thresholds of 6.0 percent and 7.5 percent, respectively.

“The most recent capital figure indicates that the banks continue to set aside adequate buffers for their risk-taking activities. A robust capital position supports financial stability which is a key policy of the BSP,” it said.

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