Banks’ capitalization still adequate, says BSP

BIG BANKS remain adequately capitalized and buffered from possible losses, with their capital adequacy ratio (CAR) on solo basis improving to 15.55 percent as of the third quarter of last year, the Bangko Sentral ng Pilipinas said Saturday.

The CAR measures the banks’ capital levels relative to their risky assets. Higher capitalization allows banks to absorb more losses when clients default.

In a statement, the BSP said universal and commercial banks’ capital ratios grew on the back of “profitable operations and issuance of new shares as well as the infusion of foreign bank capital.”

The BSP had allowed six foreign banks to fully operate in the country.

Universal and commercial banks’ CAR on solo basis as of end-September last year rose from 15.48 percent at as of the end of June.

Their CAR on consolidated basis, however, slightly slid to 16.4 percent in the third quarter from 16.42 percent a quarter ago.

The BSP said the CAR figures were “well-above” the domestic regulatory threshold of 10 percent and the international minimum of 8 percent.

“The industry’s capitalization remains predominantly composed of Common Equity Tier 1 (CET 1), the highest quality among instruments eligible as bank capital,” the BSP said.

As of the end of September, universal and commercial bank’s CET 1 ratios rose to 12.99 percent of risk weighted assets (RWA) on solo basis and 13.92 percent on consolidated basis from 12.87 percent and 13.89 percent, respectively, a quarter ago.

As for the banks’ Tier 1 ratios, they improved to 13.18 percent and 14.08 percent on solo and consolidated bases from end-June’s 13.06 percent and 14.05 percent, respectively.