Loss-absorbing capital held by the country’s major banks rose at the end of the second quarter amid heightened efforts by the industry to raise more money to bolster operations.
Data from Bangko Sentral ng Pilipinas (BSP) showed universal and commercial banks’ capital adequacy ratio (CAR) improved to 15.48 percent. Including the books of subsidiaries, the industry’s cumulative CAR stood at 16.42 percent.
The end-June ratios are higher than the 15.07 percent and 16.10 percent CAR on solo and consolidated bases recorded a quarter earlier.
CAR refers to the amount of capital banks have relative to risky assets. The central bank prescribes a minimum CAR of 10 percent for major banks. The more capital a bank has, the more of its clients’ deposits can be used for loans and investments.
The industry’s capital at the end-June this year is composed mainly of Common Equity Tier 1 (CET 1), which is the highest quality among instruments eligible as bank capital. The CET 1 of universal and commercial banks represented 12.87 percent and 13.89 percent of risk weighted assets (RWAs) on solo and consolidated bases at end of the second quarter.
Universal and commercial banks account for 90 percent of all Philippine lenders’ assets and resources.
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