The country’s biggest banks were seen easily complying with the Bangko Sentral ng Pilipinas’ (BSP) new regulation aimed at ensuring that lenders are liquid in the short term under Basel 3 rules, debt watcher Fitch Ratings said yesterday.
“Major universal and commercial banks in the Philippines should be well-positioned to meet new Basel 3 liquidity rules. Ample domestic system liquidity, and banks’ balance sheets being mostly funded by deposits, are positive structural factors that will help banks comply with upcoming Liquidity Coverage Ratio (LCR) requirements,” Fitch said in a statement.
Last Tuesday, the BSP said its policymaking Monetary Board has adopted the LCR framework to strengthen universal and commercial banks’ liquidity position.
The new standard forms part of the Basel Committee on Banking Supervision’s Basel 3 reform package, which also mandated big banks to raise adequate capital buffers.
“Under the new rule, universal and commercial banks, including foreign bank branches, shall hold sufficient high-quality liquid assets (HQLAs) that can be easily converted into cash to service liquidity requirements over a 30-day stress period. This provides banks with a minimum liquidity buffer to be able to take corrective action to address a liquidity stress event,” the BSP earlier explained.
According to Fitch, the new regulation will allow “those with relatively large pools of corporate deposits [to] have a greater reason to pursue retail deposits more aggressively,” hence might jack up long-term debt issuance among the largest banks.
“Fitch’s internal estimates for its rated banks indicate broadly that most of the top 10 domestic banks should comfortably meet the LCR rules,” it said.
However, “loan growth has exceeded deposit and M3 liquidity growth over the last five years and system liquidity would tighten gradually if this dynamic were to continue,” Fitch noted.