BSP OKs increase in bank capitalization

MANILA, Philippines -  The Bangko Sentral ng Pilipinas (BSP) approved yesterday an increase in local banks’ minimum capital requirement to as much as P20 billion for universal banks with more than 100 branches.

The central bank said its policymaking body, the Monetary Board, ordered the hike in capital requirements for universal, commercial, thrift, rural and cooperative banks to further strengthen the local banking system.

“The MB adjusted the level of the required minimum capital to ensure that banks stand on a strong capital base to support a threshold scale of operations to operate viably and service effectively the needs of their clients,” the BSP said.

“Asset growth, increasing complexity, technological innovations, liberalization of foreign bank entry, the opening of rural banks to foreign investments, and the upcoming regional banking integration were considered in adjusting the minimum capitalization of banks,” the central bank added.

The existing minimum capital requirement for universal banks which stand at P4.95 billion and that for commercial banks at P2.4 billion have been unchanged since 1999. The BSP, meanwhile, last raised the minimum capital of thrift banks in 2010 and the requirement for rural banks in 2011.

“Under the new regulation, the minimum capital level of universal and commercial banks will be tiered based on network size as indicated by the number of branches,” the BSP said. This means the required capital would increase as a bank’s branch network expands.

Universal banks with only head offices in the country should now maintain a minimum capital of P3 billion, while those with up to 10 branches need at least P6 billion. Universal banks with 11 to 100 branches are required to keep a P15-billion capital, while those with more than 100 branches need P20 billion.

For commercial banks with only head offices, a P2-billion capital has been ordered. This will increase to P4 billion for those with up to 10 branches, and to P10 billion for a network of 11 to 100 branches. Commercial banks with more than 100 branches are required to have a capital of P15 billion.

“For thrift, rural and cooperative banks, both the location of the head office and size of the physical network are considered in tiering the minimum capital requirements,” the BSP said.

Thrift banks with head offices in Metro Manila are now required to have P500 million to P2 billion as minimum capital, based on the number of their branches, while those headquartered outside the capital need P200 million to P800 million.

Rural and cooperative banks with head offices in Metro Manila are also now mandated to keep P50 million to P200 million in capital based on their branch network. Those with head offices outside the capital and in first to third class municipalities are required a minimum P20 million to P80 million in capital, while those headquartered in fourth to sixth class municipalities should have P10 million to P40 million for capital.

The BSP said banks that will not immediately meet the new requirements may opt for a five-year transition period to fully comply but they will need to submit a capital build-up program before the central bank.

Banks that will not be able to propose a capital build-up program and also fail to meet new capital requirements may be slapped with the restriction in their expansion plans.

“Consistent with global efforts to enhance bank regulation, the BSP finds it prudent to continuously update domestic regulatory standards given the ever-changing risks faced by the banking sector,” the BSP said.

 “[I]nfusing additional capital to domestic banks will put the Philippines in a better position when the ASEAN (Association of Southeast Asian Nations) Banking Integration Framework is implemented in the coming years,” the BSP added.