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Philippine Banking System CARs Remain Above 10 Percent

10.08.2008

Capital adequacy ratios (CARs) within the Philippine banking system collectively stood at 14.49 percent on solo basis and 15.49 percent on consolidated basis as of end-March 2008.  The latest values are still significantly well above both the 10 percent prudential norm required by the Bangko Sentral ng Pilipinas (BSP) and the 8 percent international standard under the Basel Accord.

The March 2008 figures are lower, however on both quarter-on-quarter (QoQ) and year-on-year (YoY) bases.  The decline is attributable, among others, on the assignment of higher risk weights to certain assets and the incorporation of operational risk charge in the capital adequacy framework.  Numerically, these changes contributed to the increase in risk-weighted assets (RWA) of P157.2 billion QoQ on solo basis while matched by a P15.5 billion increase in qualifying capital over the same period.

Increases in RWAs, which are much larger than their corresponding increases in qualifying capital are consistently found across bank categories.  However, the combined effect of these factors led to a decline in the CAR for universal and commercial banks while resulting in the increase in the CAR for thrift, rural and cooperative banks.  The same trend is found for both solo and consolidated bases.

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Tables:

1. CARs of banking system and bank groups for End-March 2008 vs. End-December 2007 and End-March 2007

2. Quarter-on-quarter Levels of Qualifying Capital and Risk-Weighted Assets across bank types for solo and consolidated bases

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