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Philippine Banks Remain Well-Capitalized

10.13.2010

The Philippine banking system’s capitalization remained healthy and above regulatory/international standards as system-wide capital adequacy ratio (CAR), a risk-based measure of solvency, continued to exceed BSP’s minimum requirement of 10 percent and the Basel Accord’s standard ratio of 8 percent.    As of end-March 2010, the banking system’s CARs stood at 14.90 percent on solo basis and 15.95 percent on consolidated basis, both of which were slightly higher than those recorded in the previous quarter.  Similarly, Tier 1 (T1) capital ratios of 12.41 percent on a solo basis and 12.56 percent on a consolidated basis remained significantly high as T1 capital continued to comprise the major component of qualifying capital. 

The faster growth of qualifying capital over risk weighted assets (RWA) supported the sustained strengthening of the banking system’s capitalization.  Quarter-on-quarter, qualifying capital grew by 0.55 percent or P3.41 billion on a solo basis and 1.62 percent or P11.09 billion on a consolidated basis.   The RWA, on the other hand, merely inched up by 0.19 percent or P7.98 billion on a solo basis and by 0.52 percent or P22.50 billion on a consolidated basis mainly due to increase in operational RWA during the quarter. 

Universal and Commercial (U/KB) Banking Industry. As of end-March 2010, the U/KB industry’s CAR stood unchanged at 14.99 percent relative to the previous quarter.  Minimal movement in qualifying capital and RWA levels influenced the industry’s steady CAR for the period.

On a consolidated basis, the industry’s CAR rose by 0.16 percentage point to 16.17 percent from 16.01 percent posted at end-December 2009.   The improvement resulted from the 1.50 percent growth in qualifying capital, which surpassed the 0.52 percent increment in RWA. 

Thrift Banking (TB) Industry.   The TB industry’s CARs as of end-March 2010 went up by 0.19 percentage point to 12.25 percent from that posted in the previous quarter on both solo and consolidated bases.  The strengthening of the TB industry’s CAR was on account of the 2.32 percent uptick in qualifying capital that far outpaced the 0.71 percent expansion in RWA.

Rural/Cooperative (RB/Coop) Banking Industry.  The rural/cooperative banks’ (RBs/Coop banks) CAR as of end-March 2010 stood at 18.83 percent an increase of 1.06 percentage points from that recorded in the previous quarter.  

By peer groups, rural banks posted a stronger CAR of 19.11 percent over cooperative banks’ 16.06 percent. For RBs, this ratio was 1.15 percentage points higher from the previous quarter.  For CBs, this represented a 0.22 percentage point quarter-on-quarter improvement.  The strengthening of the RCBs’ solvency ratio was also influenced by faster expansion of qualifying capital over RWA.

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