BSP Approves Changes to Bank CAR Calculation
MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) has changed guidelines on calculating the capital a bank should have as a percentage of risk-weighted credit exposures.
BSP Governor Benjamin Diokno said that the Monetary Council has issued Resolution 372 approving changes to the guidelines on the calculation of the minimum capital requirement and the risk-based capital adequacy ratio.
Under the new guidelines, the term capital will be synonymous with unimpaired capital and surplus, combine capital accounts and net worth, and refer to the total number of unimpaired paid-up capital, surplus and undivided earnings.
As such, the BSP stated that the share subscription deposit, treasury shares and total outstanding, direct and indirect unsecured credits to directors, officers, shareholders and their related interests (DOSRI) granted by the bank itself should be deducted from capital.
In the case of state-owned banks, the regulator said the adjustment should not include peso-denominated unsecured credit facilities to the national government.
For eligible capital under the risk-based capital adequacy framework, the BSP stated that treasury common stock, as well as total outstanding direct and indirect unsecured credits to DOSRI should also be deducted or added to Common Equity Tier 1. (CET-1) capital.
He said the risk-weighted amount is now the product of the net book value of assets and the risk weight associated with those assets that have a zero risk weight, as well as a 100% risk weight. .
All other assets include claims on central governments and central banks of foreign countries other than those of the highest credit quality, as well as foreign currency checks and other cash items not acceptable as international reserves.
The total outstanding amount of unsecured credit extended to DOSRI – net of allowance for credit losses, together with the adjustment excluding peso-denominated unsecured credit extended to the national government for public banks, should be deducted from capital.
For banks and institutions participating in the Personal Capital and Retirement Accounts (PERA) market and PERA investment products, they must have a net worth of at least 100 million pesos to become a director.
The BSP stated that net worth should refer to the total of unimpaired paid-in capital, surplus and undivided earnings net of total outstanding unsecured credits to DOSRI and peso-denominated unsecured credits to the national government for public banks.
BSP Governor Benjamin Diokno said the country’s banking system is healthy and stable, showing growth in assets, deposits and the loan portfolio last year despite the impact of the pandemic.
Diokno said Philippine banks also remain well capitalized, as the RCA remained well above the 10% minimum set by the BSP, as well as the 8% Basel requirement.
The BSP chief said the central bank has taken complementary measures to help put the economy back on its growth path as soon as possible.
“To calm the market and help fuel the recovery, the BSP kept the policy rate at a record high. We have reduced reserve requirements, provided advances to the national government and released a long list of regulatory relief measures for banks,” Diokno said.