HOME  ABOUT THE BANK  MONETARY POLICY  BANKING SUPERVISION  PAYMENTS & SETTLEMENTS  STATISTICS  FEEDBACK CORNER
   BSP NOTES & COINS  MONETARY OPERATIONS  LOANS-CREDIT & ASSET MGT  PUBLICATIONS & RESEARCH  REGULATIONS  PROCUREMENT

Feedback Corner

Publications and Research

Media Releases

Banking Systemís CAR Remained Resilient as of end-June 2006

02.13.2007

The Capital Adequacy Ratio (CAR) of the banking system as of end-June 2006 remained resilient as it maintains a comfortable margin over the 10 percent minimum CAR prescribed under Circular No. 280 dated 29 March 2001 and Circular No. 360 dated 03 December 2002, both as amended. 

Philippine Banking System.  The average CARs of the Philippine banking system were 17.01 percent on solo basis and 18.33 percent on consolidated basis as of end-June 2006.  These CARs were 102 basis points and 107 basis points lower than the end-March 2006 CARs of 18.03 percent and 19.40 percent on solo and consolidated bases, respectively. 

The decrease in CARs may be attributed to the combined effect of the decline in qualifying capital and slight increase in risk-weighted assets.  Qualifying capital in the banking system went down from P431.4 billion to P410.3 billion or by 4.89 percent on solo basis, while on consolidated basis, it decreased by 2.34 percent from P495.8 billion to P484.2 billion.  This was accompanied by a slight expansion in risk-weighted assets, which increased by 0.81 percent from P2,392.8 billion to P2,412.1 billion  on solo basis, and by 3.39 percent from P2,555.4 billion to P2,642.0 billion on consolidated basis.
  
On solo basis, 84 percent of the total qualifying capital or P344.6 billion represented Tier 1 capital while Tier 2 capital of P65.6 billion made up the remaining balance as of end-June 2006.   About the same capital mix comprised the total qualifying capital on consolidated basis, i.e., 82.58 percent or P399.8 billion represented Tier 1 capital and the remaining balance of P84.3 billion represented Tier 2 capital.


 Universal and Commercial Banking Industry. The CARs of universal/commercial banks cover capital charges for combined credit and market risks as provided under Circular No. 360.  The industry’s CAR on solo basis went down to 17.02 percent at end-June 2006 from 18.05 percent at end-March 2006.  Likewise, CAR on consolidated basis moved down to 18.53 percent from 19.62 percent.

The decrease in CARs in the universal and commercial banking industry resulted from the decrease in the industry’s qualifying capital coupled with an increase in its risk-weighted assets. On solo basis, the qualifying capital decreased by 5.51 percent from P374.2 billion as of end-March 2006 to P353.6 billion as of end-June 2006.  On the other hand, risk-weighted assets slightly increased by 0.23 percent from P2,072.6 billion to P2,077.3 billion.  The same trend was observed on consolidated basis as total qualifying capital fell by 2.53 percent from P438.6 billion as of end-March 2006 to P427.5 billion as of end-June 2006, while risk-weighted assets increased by 3.22 percent from P2,235.1 billion to P2,307.1 billion.

The industry’s total qualifying capital as of end-June 2006 on a solo basis was comprised of 83.71 percent or P296.0 billion Tier 1 capital and 16.29 percent or P57.6 billion Tier 2 capital.   On consolidated basis, total qualifying capital was made up of P351.2 billion Tier 1 capital and P76.3 billion Tier 2 capital. 

Thrift Banking Industry.   The CARs of the thrift banking industry of 17.62 percent as of end-June 2006 on both solo basis and consolidated basis covering credit risk as provided under Circular No.280 were lower by 121 basis points than the 18.83 percent CARs recorded as of end-March 2006.  The lower CARs of the thrift banks were due to the 5.42 percent increase in risk-weighted assets from P215.8 billion to P227.5 billion, combined with a 1.23 percent decrease in total qualifying capital from P40.6 billion to P40.1 billion.
 
Rural Banking Industry.  The CAR of the rural/cooperative banking industry of 15.41 percent as of end-June 2006, was lower by 40 basis points compared with the 15.81 percent CAR recorded as of end-March 2006. The lower CAR of the rural/cooperative banks was due to the 2.68 percent increase in risk weighted assets from P104.5 billion to P107.3 billion.

The CAR is a risk-sensitive measure of a bank’s solvency.  It relates capital to risk assets weighted according to their relative riskiness.  Circular Nos. 280 and 360 require all banks to maintain CAR of at least 10 percent both on solo (i.e., head office plus branches) and consolidated bases (i.e., parent bank plus subsidiary financial undertakings but excluding 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 the local conditions.

The BSP will be shifting to the Basel 2 Capital Adequacy Framework on 1 July 2007.  It will be conducting a parallel run of the Basel 2 reportorial framework with the existing report for Basel 1 starting with the quarter ending 31 December 2006 until the quarter ending 30 June 2007.

RSS Subscribe for updates

Archives