The Philippine banking sector’s ability to absorb risks, such as loan defaults resulting from the ill-effects of crises abroad, improved further at the end of June 2011 following the increase in the capital of industry members.
Regulators said rising capital adequacy ratios (CARs) of banks in the Philippines indicate that the banking sector will be able to fuel growth of the domestic economy despite lingering problems in the global economy.
The Bangko Sentral ng Pilipinas on Thursay reported that the average CAR— the proportion of capital to risk-exposed assets of banks—stood at 16.34 percent as of end-June last year, rising from the 15.2 percent registered in the same period the previous year.
“The expansion in the industry’s capital base was mainly driven by the banks’ net profits and additional issuances of unsecured subordinated debt,” the BSP said in a statement.
The latest CAR of the banking sector was way above the 10-percent minimum requirement of the BSP and more than double the minimum of 8 percent that international standards consider as comfortable.
Universal and commercial banks alone posted a CAR of 16.31 percent; thrift banks, 15.53 percent; and rural and cooperative banks, 18.68 percent.