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Banks adequately capitalized: BSP |
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(08 February 2005, Tuesday - Malaya)
THE banking system's capital adequacy ratios rose in June 2004, signifying the banks' compliance with the Basel 1 accord. The Bangko Sentral ng Pilipinas said that as of June 2004, the universal and commercial banks' capital adequacy ratio improved to 16.91 percent from 16.74 percent in March on a solo basis. Meanwhile, on a consolidated basis, the banks' compliance stood at 18.41 percent from 18.30 percent. Solo basis includes only the head office and the branches, while the consolidated basis includes the parent bank and all subsidiary undertakings except insurance companies. The BSP attributed the rise in capitalization to the continued build-up of banks in their resources. As of end-June 2004, on a solo basis, the banks' qualifying capital accounts, specifically Tier 1 and Tier 2 capital, grew by 2.64 percent to P328.3 billion. Of the total, 82.71 percent or P271.5 billion accounts for Tier 1 capital, while 17.29 percent or P56.8 billion accounts for Tier 2 capital. However, the banks' combined total risk-weighted assets posted a modest growth of only 1.65 percent. On a consolidated basis, the banks' combined qualifying accounts rose by 1.79 percent to P384.5 billion. Risk-weighted assets, on the other hand, rose by only 1.17 percent to P2.08 billion. Meanwhile, while the country's universal and commercial banks posted higher capital adequacy ratios, those of the thrifts posted a decline. As of June 2004, the thrift banks' capital adequacy ratio slipped by 76 basis points to 17.92 percent both on a solo basis and consolidated basis. The ratio was lower than the 18.68 percent posted in the previous quarter. The BSP attributed the reduction to the 1.68 percent increase in total risk-weighted assets and the 2.49 percent decline in the level of total qualifying capital. As of the period, the thrift banks' Tier 1 and Tier 2 capital dropped by 2.49 percent to P32.9 billion from the previous quarter. The capital adequacy ratio is a risk-sensitive measure of a bank's solvency. It is expressed as a percentage of qualifying capital to risk-weighted assets. Based on BSP Circular No. 280 issued on March 29, 2001 and BSP Circular No. 360 issued on December 3, 2002, both amended, the banks are required to maintain a capital adequacy ratio of at least 10 percent both on solo basis and consolidated basis. The ratio covers credit risk, and, additionally for universal and commercial banks, combined credit and market risks. The higher capital requirements are set forth by Basel 1 or the 1988 Basel Capital Accord, which sets the minimum capital for banks, and Basel 2 or the International Convergence of Capital Measurement and Capital Standards, which sets new standards for supervisory and disclosure practices. Read more Malaya News>> |
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