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The
capacity of various banks to withstand so-called credit
and market risks increased significantly as of end-March
this year, the Bangko Sentral ng Pilipinas (BSP) said on
Wednesday.
Defined
as their capital adequacy ratio and fixed by regulation
at 10 percent, the banks’ capital adequacy stood higher
during the period at 17.54 percent on solo basis and
18.83 percent on consolidated basis.
These
stood at only 16.85 percent and 18.13 percent as of
end-December 2006, respectively.
The
higher ratios mean the banks are better able to
withstand financial misfortunes like defaulting
borrowers on the strength of their capital at the moment
without folding up.
“The
increase in the capital adequacy ratios of the banking
system was due to expansion in the system’s total
qualifying capital from P433.8 billion to P453.3 billion
or by P19.5 billion on solo basis and from P505 billion
to P522 billion or by P17 billion on consolidated
basis,” BSP Governor Amando Tetangco Jr. said.
The
increase in qualifying capital on solo and aggregate
basis during the period grew by 4.5 percent and 3.4
percent, respectively.
The
magnitude of the capital expansion was such that the
risk-weighted assets in the system remain frozen at
P2.58 trillion on solo basis and P2.77 trillion on
aggregate basis, Tetangco said.
Capital
adequacy and its computation is based on the theory that
bank funds or assets are put at risk whenever these are
lent to customers.
The
larger the exposure the bigger the need for banks to
expand their capital bases.
According to the BSP, the banks’ total qualifying
capital of P453.3 billion on solo basis is made up of
87.9-percent tier-one or equity capital and
12.09-percent tier-two or subdebt capital as of
end-March.
Tetangco
said the total qualifying capital of universal and
commercial banks sufficiently covered the combined
credit and market risks that must be provisioned for
under a BSP circular issued in December 2002. |
