THE Monetary Board of the central bank has decided to raise the minimum capital requirements for banks to comply with Basel 3 regulations and further strengthen the financial system.
The Bangko Sentral ng Pilipinas (BSP) said in a statement on Monday that under the new regulations, the minimum capital level of universal and commercial banks will be tiered based on network size, as indicated by the number of branches.
From the existing minimum capitalization of P4.95 billion with no distinction of network size, universal banks will now be required to have P3 billion capital for their head office; P6 billion if they have up to 10 branches; P15 billion for 11 to 100 branches; and P20 billion for more than 100 branches.
“Minimum capitalization increases in tiers as the branch network gets bigger,” the BSP said.
For commercial banks, the minimum has been set at P2 billion capital for their head office; P4 billion if they have up to 10 branches; P10 billion for 11 to 100 branches; and P20 billion for 100 or more branches. Previously, commercial banks were only required to have P2.4 billion minimum capitalization with no distinction of network size.
“For thrift, rural and cooperative banks, both the location of the head office and size of the physical network are considered in tiering the minimum capital requirements,” the central bank explained.
Metro Manila-based thrift banks are required to have P500 million capital for their head office; P750 million if they have up to 10 branches; P1 billion for 11 to 50 branches; and P2 billion for more than 50 branches.
Thrift banks operating in all other areas outside Metro Manila should have P200 million capital for their head office; P300 million if they have up to 10 branches; P400 million for 11 to 50 branches; and P800 million for 50 or more branches.
Rural and cooperative banks with operations in Metro Manila are required to have P50 million capital for their head office; P75 million if they have up to 10 branches; P100 million for 11 to 50 branches; and P200 million for more than 50 branches.
Meanwhile, rural and cooperative banks operating in all cities up to third-class municipalities outside Metro Manila should have P20 million capital for their head office; P30 million if they have up to 10 branches; P40 million for 11 to 50 branches; and P80 million for 50 or more branches.
For rural and cooperative banks which operate in fourth- to sixth-class municipalities outside Metro Manila, the BSP required them to have P510 million capital for their head office; P15 million if they have up to 10 branches; P20 million for 11 to 50 branches; and P40 million for more than 50 branches.
“Moreover, existing banks, (including those which are newly authorized but not yet operating) that will not immediately meet the new minimum capital requirement may avail of a five-year transition period to fully comply,” the central bank said, noting that such banks will be required to submit an acceptable capital build-up program.
However, the BSP warned that banks that fail to propose an acceptable capital build-up or otherwise fail to comply with the minimum capital requirements, face curtailment of future expansion plans.
“The Monetary Board adjusted the level of the required minimum capital to ensure that banks stand on a strong capital base to support a threshold scale of operations to operate viably and service effectively the needs of their clients,” the central bank said.
The BSP noted that the adjustment of the minimum capitalization of banks was based on the following considerations: asset growth, increasing complexity, technological innovations, liberalization of foreign bank entry in the Philippines, the opening of rural banks to foreign investments, and the upcoming regional banking integration of the Association of Southeast Asian Nations.
“Consistent with global efforts to enhance bank regulation, the BSP finds it prudent to continuously update domestic regulatory standards given the ever-changing risks faced by the banking sector,” it concluded.