Bangko Sentral says thrift banks need to raise capital base

Thirft banks are facing a new round of capital infusions from shareholders as the central bank has required them to fortify their capital base, a Bangko Sentral ng Pilipinas (BSP) official said over the weekend. "It has already been decided that thrift banks need to have a larger capital base. The Monetary Board already approved of the capital expansion program," BSP Deputy Gov. Nestor Espenilla told reporters. Espenilla pointed out that thrift banks need to raise their equity capital — not just capital linked to the level of risks banks take on a daily basis. "This is what the Monetary Board wants the thrift banks to undertake," said Espenilla, who heads the supervision and examination sector of the central bank. The actual amount of equity that shareholders must contribute anew has not yet been decided, Espenilla said, adding that the number may be announced in a week or two. Espanilla said there is an ongoing period of consolidation among banks of all types. Thrift banks should have to observe a capital adequacy ratio of 10 percent, according to him. He said banks must maintain a certain level of capital at all times to prevent catastrophic failure borne of defaulting borrowers. The global norm is actually only 8 percent, but the Bank for International Settlements under the Basel III convention has plans to raise this to 10 percent. Espenilla is confident that the locals should have no problem meeting the higher requirement. — JE, GMA News