Big banks'capital adequacy ratio slightly improves
Published May 14, 2019 12:00 am
By Lee C. Chipongian
The country’s big banks have slightly improved capital adequacy ratio (CAR) last year with a combined capitalization of P2.1 trillion as of end-December 2018, the central bank said in a report.
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The universal and commercial banks’ CARs – a measure of banks’ capital health prescribed under Basel 3 standards – stood at 14.8 percent on solo basis and 15.4 percent on consolidated basis in 2018. Both ratios are above the minimum thresholds set by the Bangko Sentral ng Pilipinas (BSP) which is 10 percent, and the Bank for International Settlement’s (BIS) eight percent.
BSP data showed that the 2018 CARs were slightly better compared to 2017’s 14.8 percent solo basis, and 15 percent consolidated. The common equity Tier 1 or CET 1 ratio of the large banks was at 13.2 percent and 13.8 percent on solo and consolidated bases, respectively, in 2018.
In the meantime, the big banks’ credit risk-weighted assets (CRWA) remained as the main driver of the banks’ total risk-weighted assets, noted the BSP. “The increasing CRWA of banks largely consisted of loans extended to corporations. Banks also became more active in their capital build-up measures to provide support to the banking system against potential losses from the growing loan activities,” said the BSP.
The big banks’ CARs improved last year mainly because of the banking sector’s capital build-up in compliance with several Basel-based reforms implemented by the BSP. The banks were also increasing their credit portfolio.
“Banks’ capital build-up was historically driven by the increases in capital stock and retained earnings which usually held the largest portions of the total capital accounts of banks,” the BSP said in a report. Last year, the banking system’s capitalization of P2.1 trillion was 17.7 percent higher than 2017’s P1.756 trillion.
The BSP said that 46.6 percent were banks’ capital stock and these were up by 19 percent last year because of fresh capital infusions. About 16.3 percent of capital base are retained earnings and 24.7 percent were assigned capital for foreign banks.
MB file photo.logo
The universal and commercial banks’ CARs – a measure of banks’ capital health prescribed under Basel 3 standards – stood at 14.8 percent on solo basis and 15.4 percent on consolidated basis in 2018. Both ratios are above the minimum thresholds set by the Bangko Sentral ng Pilipinas (BSP) which is 10 percent, and the Bank for International Settlement’s (BIS) eight percent.
BSP data showed that the 2018 CARs were slightly better compared to 2017’s 14.8 percent solo basis, and 15 percent consolidated. The common equity Tier 1 or CET 1 ratio of the large banks was at 13.2 percent and 13.8 percent on solo and consolidated bases, respectively, in 2018.
In the meantime, the big banks’ credit risk-weighted assets (CRWA) remained as the main driver of the banks’ total risk-weighted assets, noted the BSP. “The increasing CRWA of banks largely consisted of loans extended to corporations. Banks also became more active in their capital build-up measures to provide support to the banking system against potential losses from the growing loan activities,” said the BSP.
The big banks’ CARs improved last year mainly because of the banking sector’s capital build-up in compliance with several Basel-based reforms implemented by the BSP. The banks were also increasing their credit portfolio.
“Banks’ capital build-up was historically driven by the increases in capital stock and retained earnings which usually held the largest portions of the total capital accounts of banks,” the BSP said in a report. Last year, the banking system’s capitalization of P2.1 trillion was 17.7 percent higher than 2017’s P1.756 trillion.
The BSP said that 46.6 percent were banks’ capital stock and these were up by 19 percent last year because of fresh capital infusions. About 16.3 percent of capital base are retained earnings and 24.7 percent were assigned capital for foreign banks.