BSP: Banks well insulated from external shocks

MANILA, Philippines—Universal and commercial banks in the country are well insulated from external shocks and domestic risks as their capitalization levels remain above the regulatory requirement.

The average capital adequacy ratio (CAR) of big banks in the country settled at 17.51 percent as of the end of September 2013, the Bangko Sentral ng Pilipinas (BSP) reported Wednesday.

This is slightly lower than the 17.98 percent recorded in June, and the 17.95 percent registered in September 2012.

Nonetheless, the BSP noted that the latest ratio was still way above the minimum regulatory requirement of 10 percent, and much better than the minimum of 8 percent prescribed by international standards.

A closely watched indicator that points to a bank’s ability to absorb risks, CAR is the proportion of a bank’s capital to its risk-weighted assets.

“The industry’s CAR indicate that universal and commercial banks continue to be mindful of the importance of setting aside sufficient capital,” the central bank said in a statement.

The BSP said risk-weighted assets of universal and commercial banks had a collective value of P4.96 trillion as of the end of September last year.

Their combined capital amounted to P869 billion.

“A robust 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 regulator said.

The BSP likewise reported that universal and commercial banks also remained adequately capitalized if the risk exposures and capital of their subsidiaries were taken into account.

Their average consolidated CAR stood at 18.62 percent as of the end of September—lower than the 19.24 percent registered in June last year, and the 19.01 percent recorded in September 2012.

The central bank has expressed confidence that the country’s banking sector will remain stable this year on the back of a robustly growing economy that is expected to generate more deposits.

It said the sector’s sufficient resources would allow banks to continue to aid the economy’s growth by providing loans to consumers and enterprises.

The Philippine economy last year grew by 7.2 percent—one of the fastest in Asia.

This year, the government expects the economy to grow between 6.5 and 7.5 percent.