The central bank on Monday reported that the country’s stand -alone thrift banks and rural banks were more than adequately capitalized based on its 2-year assessment under more stringent international guidelines (Basel 1.5 framework).
Stand-alone banks are those not affiliated with universal or commercial banks.
The Bangko Sentral ng Pilipinas explained that “Basel 1.5 framework is a simplified version of Basel II in view of the simple operations of stand-alone banks”
Basel 1.5 framework requires higher risk weight on foreign-currency denominated exposures to the Philippine government based on the country’s sovereign ratings; real and other properties acquired; and the inclusion of capital requirement for operational risk using the Basic Indicator Approach.
According to the BSP report, the stand-alone TBs’ capital position over the two-year period remained stable with CARs range from 17.69 percent to 22.02 percent. The banks’ net tier 1 ratios also continued to be solid at 15.12 percent to 19.20 percent.
Year-on-year, the overall CAR of stand-alone TBs improved to 18.07 percent at end-2013 from the 17.69 percent ratio in the same period a year ago.
For stand-alone R/CB, the industry also showed stability over the two-year period based on their reported CARs, which ranged from 17.98 percent to 20.67 percent.
On an annual basis, the overall CAR of stand-alone R/CBs slightly slid to 19.15 percent at end-December 2013 from 20.67 percent a year earlier.
“The combined assets of these stand-alone TBs and R/CBs accounted for 5.30 percent and 4.30 percent of the total resources of the Philippine banking system as of end-2012 and end-2013, respectively,” the BSP stated.
However, the central bank noted that in terms of operating network, the total number of offices of these banks consistently make up the bulk of the total banking industry’s structure which is 92.82 percent in 2012 and 92.57 percent in 2013.
Meanwhile, the Philippine banking system’s CAR over the two-year period, which was strongly influenced by the capital adequacy of universal and commercial banks, was highest at 18.01 percent as of end-June 2013, while the lowest ratio was posted in December 2013 at 16.58 percent.
“The CARs of the banking system as a whole, which composed of the CARs of different bank categories indicate the industry’s continued efforts to maintain robust capitalization,” the central bank said.
The BSP noted that the banking system’s CAR for the period was computed by combining the adequacy ratio of stand-alone banks with the previously reported and confirmed CARs of universal and commercial banks and its thrift bank subsidiaries.
“A strong capital position promotes financial stability by providing individual banks and the industry with an adequate buffer against unexpected losses that may arise during times of stress,” it said.