Home » Cebu Daily News » Opinion

BSP raises capital requirements for thrift banks

Increased rates apply to new, converting banks First Posted 22:13:00 03/01/2011

  • Reprint this article
  • Send as an e-mail
  • Post a comment
  • Share

MANILA, Philippines?The Bangko Sentral ng Pilipinas is increasing the minimum capital requirements for thrift banks in line with efforts to further strengthen the banking system.

The new capitalization requirements, however, apply only to new thrift banks, existing banks converting into thrift banks, and thrift banks relocating head offices to areas falling under higher classifications.

The adjustments vary depending on the location of the banks? head offices.

The required capital for banks with head offices in Metro Manila was increased to P1 billion from P325 million.

For those with headquarters in the cities of Cebu and Davao, the level was raised to P500 million from only P52 million.

For thrift banks with head offices in other areas, the level was increased to P250 million from P52 million.

Banks headquartered in Metro Manila are slapped a higher minimum capitalization requirement on the assumption that they engage in bigger volumes of transaction.

?The new minimum capital requirements for thrift banks aim to further boost the capital base of the thrift banking system, as well as enable new entrants to adequately take on the risks inherent in the increasingly sophisticated banking business and effectively compete with existing banks,? the BSP said in a statement.

The move followed a similar capital-requirement increase imposed on rural banks starting November last year.

The BSP said the increases in capitalization requirements were consistent with global efforts to enhance bank regulation to avoid banking-related crises in the future.

Moves to update international regulatory standards came amid the latest global economic turmoil, which analysts said stemmed from bank failures in the United States.

BSP Deputy Governor Nestor Espenilla Jr. said the banking system in the Philippines, compared with those in industrialized Western countries, was stronger given the banks? higher liquidity, lower exposure to bad debts and the sufficiency of their capitalization.

Espenilla said it was prudent to continuously update domestic regulatory standards given the ever-changing risks faced by the banking sector.

Philippine banks are likewise directed to put up capitalization cover for non-traditional types of risk, or those other than the risks arising from potential loan defaults by borrowers, starting this year.

Under the Internal Capital Adequacy Assessment Program, the BSP requires banks to submit a list of assets and the corresponding risks these resources are exposed to, and to put up a corresponding capital cover.

blog comments powered by Disqus

  • Print this article
  • Send as an e-mail
  • Most Read RSS
  • Share
© Copyright 2015 INQUIRER.net. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.