Universal and commercial banks (U/KBs) sustained their robust capitalization as the industry’s capital adequacy ratios (CARs) collectively stood at 17.98 percent on solo basis and 19.24 percent on a consolidated basis as of end-June 2013, the Bangko Sentral ng Pilipinas (BSP) said on Thursday.
“These high ratios are still driven by the industry’s Tier 1 capital, the highest quality among instruments eligible as bank capital,” it stated.
BSP data noted that the industry’s Tier 1, which represents high quality and loss-absorbent capital, is still robust at 16.46 percent and 16.75 percent of the banks’ risk-weighted assets (RWAs) on solo and consolidated basis, respectively.
The BSP noted that the sustained strength of the industry’s CARs resulted from the faster growth pace of qualifying capital vis-à-vis that of RWA.
Quarter-on-quarter, the second quarter CAR of U/KBs grew by 1.18 percent on solo basis and 2.12 percent on a consolidated basis.
The monetary authority said that the increase can be attributed “to profitable operations of banks in the second quarter of 2013 as well as the issuances of additional common stocks.”
The industry’s total assets also expanded to P7.709 trillion in the second quarter from P7.272 trillion a quarter ago.
However, despite the increase in total assets, the industry’s RWA decreased by 0.12 percent on solo basis mainly because of the reduction in the risk weight/capital charge of Philippine sovereign issues denominated in foreign currencies from 100 percent to 50 percent.
“This reduction in risk weight/capital charge is a direct result of the credit rating upgrade of the Philippines into investment grade,” the BSP said.
Also, RWA increased slightly by 0.22 percent on a consolidated basis.
Without the change in risk weight/capital charge of Philippine sovereign issues denominated in foreign currencies, the industry’s RWA would have increased by 2.7 percent on solo basis.
“The industry’s CAR figures indicate U/KBs’ continued efforts to maintain robust capitalization. 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,” the central bank said.