The capital adequacy ratios (CARs) of the banking system remained well above the BSP's minimum required CAR of 10 percent and BIS standard ratio of 8 percent. The banking system's end-March 2009 CARs on solo and consolidated bases stood at 14.56 percent and 15.30 percent. These ratios, however, were 0.18 percentage point and 0.19 percentage point lower than that registered as of end-December 2008 on solo and consolidated bases, respectively. Likewise, the end-March 2009 Tier 1 (T1) capital ratio of the banking system dropped by 0.11 percentage point and 0.17 percentage point as it settled at 12.20 percent and 12.21 percent on solo and consolidated bases, respectively.
The decline in the banking system's CARs was expected following the implementation of the last phase of the staggered increase in risk weight applied to foreign-currency (FCY) denominated exposures to the National Government (NG) (i.e., from 0 percent to 33.33 percent starting 1 July 2007, to 66.67 percent starting 1 January 2008 and to 100 percent starting 1 January 2009). The said increase in risk weight coupled with the expansion of assets contributed largely in the growth of the banking systems risk weighted assets (RWA). RWA expanded by 2.8 percent (P105.7 billion) on solo basis, and by 2.9 percent (P114.9 billion) on consolidated basis as compared to that in the previous quarter.
The impact of the increase in the RWA, however, was minimized by the continued growth of the qualifying capital of the banking system as it posted 1.53 percent (P8.5. billion) and 1.65 percent (P9.9 billion) quarter-on-quarter growths, on solo and consolidated bases, respectively. The increase in qualifying capital was mainly due to capital notes and unsecured subordinated debt (UnSD) issuances by two (2) universal banks.
Universal and Commercial (U/KB) Banking Industry. As driver of the banking system's CAR, the same trends were noted in the CARs of U/KBs. The U/KB industry's CAR on solo basis of 14.65 percent slid by 0.16 percentage point from that registered as of end-December 2008. The capital level of the industry grew by P8.3 billion mainly due to the issuance of P12.0 billion T1 capital notes and P3.0 billion UnSD qualifying as lower Tier 2 (LT2) by two (2) domestic universal banks. These issuances, however, were partly offset by redemption of existing P3.0 billion LT2 UnSD of one (1) domestic universal bank. In the same period, the industry's RWA increased by P93.8 billion.
On a consolidated basis, the industry's CAR of 15.48 percent as of end-March 2009 was trimmed by 0.21 percentage point from its previous quarter's CAR. The decline resulted from a P115.8 billion-hike in RWA supported by only a P10.4 billion growth in capital.
Thrift Banking (TB) Industry. As of end-March 2009, the TB industry's CAR also slipped to 12.15 percent from 12.80 percent as of end-December 2008. The industry's CAR dropped as a result of the P0.5 billion decline in qualifying capital coupled with the P12.3 billion increase in RWA.
Rural/Cooperative (RB/Coop) Banking Industry. In contrast to the rest of the banking system, the RBs/Coop banks recorded higher CAR as of end-March 2009. The RBs/Coop banks' CAR of 18.03 percent was 0.60 percentage point higher than that recorded as of end-December 2008. The slight increase in the industry's CAR stemmed from the combined effect of the P0.6 billion growth in the qualifying capital and the P1.5 billion decline in the RWA.