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Implementation of Basel II in the Philippines

The Revised Risk-Based Capital Adequacy Framework of the Bangko Sentral ng Pilipinas (BSP) is largely patterned after the International Convergence of Capital Measurement and Capital Standards, A Revised Framework commonly known as Basel 2.1

The implementing guidelines of the framework covering Pillars 1 and 3 of Basel 2 (minimum capital requirements and disclosures requirements, respectively) were issued under Circular No. 538 dated 4 August 2006 and took effect on 1 July 2007. To address the Pillar 2 component, the BSP issued Circular No. 639 on 15 January 2009 which includes guidelines on banks’ Internal Capital Adequacy Assessment Process (ICAAP) and the BSP’s corresponding Supervisory Review Process (SRP). The guidelines under Circular Nos. 538 and 639 are applicable to all universal and commercial banks (U/KBs) and their subsidiary banks and quasi-banks on both solo and consolidated bases, although the Pillar 2 guidelines are applied at the consolidated level only. Upon the effectivity of Circular No. 639 on 1 January 2011, the BSP would have completed the implementation of Basel 2 for all U/KBs and their subsidiary banks and quasi-banks.

Stand-alone thrift banks (TBs), rural banks (RBs) and cooperative banks (Coop Banks), which refer to TBs, RBs and Coop Banks that are not subsidiaries of U/KBs, are covered by a separate capital adequacy framework referred to by the BSP as the Basel 1.5 framework. The implementing guidelines of Basel 1.5 are provided in Circular No. 688 dated 26 May 2010 which will take effect on
1 January 2012. Unlike the full Basel 2 framework, Basel 1.5 involves only a few key changes to the old risk-based capital adequacy framework under Circular No. 280 dated 29 March 2001, as amended.

Outlined below are the various issuances and related materials from the BSP on the implementation of the capital standards in the Philippines:

Implementing Guidelines

For U/KBs, and their subsidiary banks and quasi-banks

Circular

Subject

Circular No. 538 dated 4 August 2006

Revised Risk-Based Capital Adequacy Framework

Circular No. 360 dated
3 December 2002, as amended

Guidelines to incorporate market risk in the risk-based capital adequacy framework for U/KBs

Circular No. 639 dated
15 January 2009

Internal Capital Adequacy Assessment Process (ICAAP) and Supervisory Review Process (SRP)

For stand-alone TBs, RBs and Coop Banks

Circular

Subject

Circular No. 280 dated
29 March 2001, as amended

Guidelines on the adoption in the Philippines of the risk-based capital adequacy framework pursuant the General Banking Law of 2000.
(Credit Risk Framework)

Circular No. 688 dated
26 May 2010

Revised risk-based capital adequacy framework for stand-alone thrift banks, rural banks and cooperative banks (effective on 1 January 2012)

For stand-alone QBs

Circular

Subject

Circular No. 400 dated
1 September 2003

Guidelines on the adoption of the risk-based capital adequacy
framework by quasi-banks

Other Related Issuances

Reporting Templates

News Releases

Speeches

Presentations

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1 The Basel Committee on Banking Supervision has issued the said capital standards in 26 June 2004. The comprehensive version of the capital standards dated June 2006, including the recent enhancements to the framework can be accessed at www.bis.org.

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