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U/KB Banking Industry CARs Continue to Persist Above 10 Percent


The risk-based CARs of universal and commercial banks (U/KBs) and their subsidiary banks and quasi-banks continued to grow and remain well above the BSP’s minimum ratio of 10 percent and the Basel Accord’s standard ratio of 8 percent despite prolonged global uncertainties.  The U/KB banking industry average CARs stood at 16.85 percent and 18.01 percent as of end-March 2012 on solo and consolidated bases, respectively, which were 0.19 percentage point and 0.29 percentage point higher than those registered as of end-December 2011.   Similarly, its Tier 1 (T1) capital ratios continued to exceed international norms at 14.31 percent and 14.46 percent on solo and consolidated bases, respectively.
On solo basis, the increase in the CAR of the industry was due to the 4.86 percent growth in qualifying capital which exceeded the growth in RWA of 3.69 percent.   The expansion in the industry’s capital base was mainly driven by the banks’ net profits for the first quarter of 2012 and some additional issuances of capital instruments.    On the other hand, the increase in RWA was largely driven by the increased in market RWA largely on account of the additional capital charge on bank’s non-deliverable (NDF) forwards transactions as required under Circular No. 740 dated 16 November 2011, which took effect on 1 January 2012.  

Meanwhile, the same trends were seen in the CARs of thrift banks (TBs), which are a subsidiary of a U/KB, as their CARs went up from 16.66 percent to 18.13 percent on solo basis.  The strengthening in the U/KB subsidiary TBs CAR was due to the 13.26 percent uptick in qualifying capital that far outpaced the 4.08 percent hike in RWA.  The growth in qualifying capital was mainly due to TB’s net profits for the first quarter of 2012 and the issuance of unsecured subordinated debt qualifying as lower T2 capital by 1 subsidiary TB.

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