The Bangko Sentral ng Pilipinas (BSP) on Wednesday (Feb. 26) announced an improved policy for measuring the capital levels of some of the country’s smaller banks in a bid to improve the resilience of these financial institutions against market shocks.
In a press statement, the BSP said its Monetary Board approved the amendments to the risk-based capital adequacy framework for stand-alone thrift, rural and cooperative banks to further enhance the quality of capital of covered banks.
“This reinforces the importance of maintaining sufficient level of common equity which could absorb losses on an ongoing basis,” the BSP said.
The enhanced capital standards provide minimum capital ratios of 6 percent Common Equity Tier 1 ratio and 7.5 percent Tier 1 ratio.
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This is in addition to the existing minimum capital adequacy ratio of 10 percent.
Tier 1 capital is largely composed of conventional equity elements such as common shares, additional paid-in capital, retained earnings, and undivided profits.
