BSP approves changes to computation of banks’ CAR

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) has amended the guidelines on the computation of how much capital a bank should have as a percentage of risk-weighted credit exposures.

BSP Governor Benjamin Diokno said the Monetary Board has issued Resolution   372 approving the amendments to the guidelines on the computation of the minimum required capital and the risk-based capital adequacy ratio.

Under the new guidelines, the term capital shall be synonymous to unimpaired capital and surplus, combine capital accounts and net worth, and shall refer to the total number of the unimpaired paid-in capital, surplus, and undivided profits.

As such, the BSP said deposit from stock subscription, treasury stock, and the total outstanding unsecured credit accommodations, both direct and indirect to directors, officers, stockholders, and their related interests (DOSRI) granted by the bank proper should be deducted from capital.

In the case of state-run banks, the regulator said the adjustment should not include the unsecured peso-denominated credit accommodations to the national government.

For the qualifying capital under the risk-based capital adequacy framework, the BSP said common stock treasury shares, as well as the total outstanding unsecured credit accommodations, both direct and indirect, to DOSRI should also be deducted or added to the common equity tier 1 (CET-1) capital.

It said the risk-weighted amount is now the product of the net carrying amount of the assets and the risk weight associated with that assets that have zero risk weight, as well as 100 percent risk weight.

All other assets include claims on central governments and central banks of foreign countries other than those with the highest credit quality, as well as foreign currency checks and other cash items not acceptable as international reserves.

The total outstanding unsecured credit accommodations to DOSRI – net of allowance for credit losses, as well as the adjustment excluding the unsecured peso-denominated credit accommodations to the national government for state-run banks, should be deducted from the capital.

For banks and institutions participating in the Personal Equity and Retirement Account (PERA) market and PERA investment products, they  should have a net worth of at least P100 million to become an administrator.

The BSP said the net worth should refer to the total unimpaired paid-in capital, surplus, and undivided profits net of the total outstanding unsecured credit accommodations to DOSRI and the unsecured peso-denominated credit accommodations to the national government for state-run banks.

BSP Governor Benjamin Diokno said the country’s banking system is sound and stable, posting growth in assets, deposits, and loan portfolio last year despite the impact of the   pandemic.

Diokno said   Philippine banks also remain well capitalized as the CAR remained well above the 10 percent minimum set by the BSP, as well as the eight percent under the Basel requirements.

The BSP chief said the central bank did complementary moves to help put the economy back to its growth trajectory the soonest possible time.

“In order to calm the market and to help fuel the recovery, the BSP kept policy rate at a record low. We reduced the reserve requirement, provided advances to the national government, and issued a long list of regulatory relief measures for banks,” Diokno said.