The Philippine economy, as measured by gross domestic product (GDP), has maintain a reasonably “healthy pace” despite the financial volatility in the second half of 2013, credit rating firm Fitch Ratings said on Monday.
“Southeast Asian countries have been buffeted by the emerging market financial volatility in the second half of 2013; but Malaysia and, in particular, the Philippines, have managed to maintain a reasonably healthy pace of GDP growth,” Fitch said in a statement.
The domestic economy grew by 7 percent in the third quarter of 2013, boosting the 2013 first nine months growth to 7.4 percent amid uncertainties brought by the tapering announcement of the United States Federal Reserve.
Meanwhile, the ratings agency suggested that the Philippines “could resort to greater macro-prudential measures in 2014 to limit the build-up of potential asset-price bubbles.”
It also noted that the Philippines has “fast-tracked” efforts to comply with the Basel III-compliant Tier 1 capital ratio since the beginning of this year. Fitch was referring to a memorandum from the Bangko Sentral ng Pilipinas (BSP), which stated that the country’s universal and commercial banks must comply with Basel III’s capital adequacy standards by January 1, 2014.
Under the BSP memorandum, banks will be required to have a 10-percent capital adequacy ratio. Of this, Tier 1 capital must form 7.5 percent. Of the Tier 1 capital, common equity Tier 1 capital must make up at least 6 percent.
“It does not therefore come as a surprise that rights issues have gone ahead despite volatile market conditions,” the ratings agency stated.
On the other hand, Fitch said that the Philippine-based Bank of the Philippine Islands (BPI), which is rated BBB transition to Basel III, is driving the bank to raise capital. The ratings agency noted the recent announcement of BPI that it plans to raise up to P25 billion in common equity, in line with new banking regulations under the Basel III standards as well as corporate expansion plans.
“The local and regional market for additional Tier 1 capital and subordinated debt remains in a fledgling state, though ongoing rights issues by these banks should further bolster their loss-absorption capabilities in the run-up to a full transition to Basel III,” Fitch stated.