Local banks’ capital structure healthy – BSP

MANILA, Philippines – The Bangko Sentral ng Pilipinas (BSP) said yesterday that the banking industry managed to keep its capital levels significantly above international standards after banks successfully raised fresh equity through the issuance of various debt instruments.

The BSP said that the capital adequacy ratios (CARs) of the banking system remained healthy at 14.85 percent on a solo basis and 15.78 percent on a consolidated basis as of end-2009, exceeding the central bank’s 10-percent minimum requirement and the international benchmark ratio of eight percent under the Basel accord.

The CARs of the industry, according to statistics, was slightly higher than the 14.82 percent on a solo basis and 15.76 percent on a consolidated basis recorded as of end-September last year.

“The slight improvement in the banking system’s CARs was due to the almost matching growth rate of qualifying capital and risk weighted assets,” the BSP reported.

The central bank traced the rise to the increase in the net profits of some banks and the P9.3 billion issuances of Tier 1 capital instruments and unsecured subordinated debts qualifying as lower Tier 2 capital by several banks.

As a result, the qualifying capital position of the banking system as of end-December 2009 posted a 3.63 percent increase or P21.8 billion on a solo basis and 3.76 percent or P24.8 billion on a consolidated basis.

On the other hand, the BSP said the risk weighted assets of the banking system expanded by 3.44 percent or P139.3 billion on solo basis and by 3.59 percent or P150.4 billion on consolidated basis.

The CAR is a ratio of a bank’s capital to its risk and the central bank tracks this indicator to ensure that banks have the capability to absorb a reasonable amount of loss and that they are complying with their statutory capital requirements.

The BSP said the CAR of the universal and commercial banking industry improved by 0.05 percentage point to 14.99 percent on a solo basis on the back of a 3.92 percent or P20.9 billion rise in qualifying capital and the 3.59 percent or P128 billion increase in risk weighted assets.

Major players in the universal and commercial banking industry raised P5.5 billion through the issuance of Tier 1 capital instruments and P3.8 billion in unsecured subordinated debts qualifying as lower Tier 2.

On the other hand, the industry’s CAR improved by 0.03 percentage point to 16.01 percent as of end-December last year due to a 3.91 percent growth in qualifying capital.

The BSP also reported that the CAR of the thirft banking industry declined by 0.1 percentage point to 12.06 percent as of end-December from 12.16 percent as of end-September. –Lawrence Agcaoili (The Philippine Star)