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Banks report compliance with capital adequacy ratio of BSP |
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The Philippine Star 02/08/2005
The Bangko Sentral ng Pilipinas disclosed yesterday that as of end-June 2004, universal, commercial and thrift banks reported sustained compliance with the risk-based capital adequacy ratio as provided for under BSP regulations. Universal and commercial banks exhibited further improvements in capital adequacy ratios (CARs). The industry’s CAR (on solo basis) rose to 16.91 percent from 16.74 percent at end-March 2004. Likewise, CAR (on consolidated basis) increased to 18.41 percent from 18.30 percent. These CARs cover capital charges for combined credit and market risks as provided for under BSP Circular No. 360. These developments were attributed to market participants’ continued commitments to their respective capital buld-up programs. Their combined qualifying capital accounts (on solo basis) rose by 2.64 percent to P328.3 billion. Meanwhile, their aggregate total risk-weighted assets posted a much lower expansion of 1.65 percent. Of the total qualifying capital, 82.71 percent or P271.5 billion was accounted for by Tier 1 capital, while Tier 2 capital amounting to P56.8 billion made up the remaining balance. On a consolidated basis, combined qualifying capital accounts increased by 1.79 percent to P384.5 billion while risk weighted assets rose by only 1.17 percent to P2,088 billion. Meanwhile, the capital adequacy ratio of thrift banks was posted at 17.92 percent, lower by 76 basis points compared to the 18.68 percent CAR the previous quarter. The reduction was due mainly to the 1.68 percent increase in total risk-weighted assets accompanied by a 2.49 percent decline in the level of total qualifying capital which amounted to P32.9 billion and was 2.49 percent less than its level the previous quarter. The capital adequacy ratio or CAR is a risk-sensitive measure of a bank’s solvency. It relates capital to risk assets weighted according to their relative riskiness. BSP circular No. 280 dated March 29, 2001 and BSP Circular No. 360 dated Dec. 3, 2002, both as amended, require all banks to maintain CAR of at least 10 percent both on solo basis (i.e., head office plus branches) and consolidated basis (i.e., parent bank plus subsidiary financial) undertakings but exlcuding insurance companies) covering credit risk, and for universal and commercial banks, combined credit and market risks. The BSP issuances are based on the 1988 Basel Capital Accord (also known as Basel 1) and its 1996 amendment prepared by the Basel Committee on Banking Supervision based in Basel, Switzerland with modifications to suit local conditions. |
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