Banks' capital adequacy ratio remains strong — BSP

The capital adequacy ratio (CAR) of Philippine banks remained strong as of end-June last year, the Bangko Sentral ng Pilipinas (BSP) said over the weekend. The industry's stand-alone CAR, which pertains only to that of parent banks, was at 15.2 percent as of end-June, and at 16.2 percent for the consolidated ratio that included those of subsidiaries and affiliates, the BSP said in a statement. Both measures topped the 10-percent minimum set by the central bank and the 8 percent by "the central bank of all central banks," the Bank for International Settlements. As of end-March 2010, banks' individual and consolidated CARs averaged at 14.9 percent and 15.9 percent, respectively. CAR is a measure of solvency or the ability of a business to pay its liabilities. As of end-June, tier-one capital or capital coming from shareholders stood at 12.8 percent on solo basis and 12.9 percent on aggregate or consolidated basis, the central bank said. The BSP noted that the CARs of big universal banks and regular commercial banks improved to 15.37 percent and 16.45, repectively, as of end-June. The thrift banks' CAR fell to 12.04 percent from 12.25 percent, the central bank said, explaining a decline in qualifying capital by P500 million and a rise in risk-weighted assets by P2 billion were responsible for the change. Rural and cooperative banks also posted slightly lower CAR of 18.79 percent from 18.83 percent as their risk-weighted assets swelled during the period, the BSP said. Rural banks alone, however, posted a higher CAR of 18.95 percent compared with cooperative banks whose CAR stood at 17.16 percent, the BSP added. The risk-based capital approach requires banks and financial institutions to put in additional capital as the degree of risks they take in the course of doing business expands. — JE/VS, GMANews.TV