MANILA, Philippines—Gotianun-led EastWest Banking Corp. has decided to redeem P1.25 billion in debt that currently serves as part of its capital buffer ahead of stricter capitalization rules that take effect in January 2014.
In a disclosure on Tuesday, EastWest Bank said the Bangko Sentral ng Pilipinas (BSP) Monetary Board had approved the bank’s plan to exercise its call option for unsubordinated debt issued in 2008. The debt paper was originally scheduled to mature in 2019.
“The approval of the pre-termination of the subordinated debt, qualifying as Tier 2 capital, came amid preparations for Basel III, which will take effect on Jan. 1, 2014,” the bank said in a statement.
“The subordinated notes will become ineligible under Basel III,” it added.
Under Basel III rules to be implemented in January, the minimum 10-percent capital adequacy ratio (CAR) for major banks will be maintained. However, a larger portion of this capital will have to be made up of higher-quality tier 1 capital or common equity in the bank.
Certain forms of tier 2 capital, which are more similar to debt than equity, will also be barred under the new rules.
Last month, the bank announced plans to offer P10 billion in Basel III-eligible securities in the form of Additional Tier 1 (AT1) or Tier 2 capital, subject to regulatory approvals.
The bank also said that it was adequately capitalized to meet the stringent requirements of Basel III.
“The issuance of additional securities is to ensure that it is well above the minimum capital adequacy requirement of the new regulatory standard,” the bank said.
EastWest reported a third-quarter net income of P1.7 billion or a 28-percent year-on-year increase.
Its capital adequacy ratio remains more than adequate at 17.1 percent as of the third quarter of the year, much higher than the minimum 10 percent required by the BSP.—Paolo G. Montecillo