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THE
banks’ capacity to sustain losses without toppling over
hardly changed as of end-December 2006 at 16.85 percent,
or still higher than the regulatory norm of 10 percent.
The
Bangko Sentral ng Pilipinas (BSP) reported on Thursday
this was 51 basis points lower than three months earlier
when the ratio stood at 17.35, although also higher than
the year-ago ratio by 47 basis points.
“The
slight decline in the capital adequacy ratios (CAR) of
the banking system resulted from the faster growth in
risk-weighted assets relative to the increase in the
banks’ total qualifying capital,” the BSP said in a
statement.
The
ratio recognizes that everything the banks have lent out
have been effectively put at risk, for which they must
set aside a portion of everything they own as buffer in
case of default or loss.
In this
case, BSP Circular 360 issued in December 2002 mandates
that the banks must put up 10 centavos as capital cover
for each peso worth of assets so recognized in their
books.
Given
updated guidelines under
Basle 2 on capital cover kicking in starting next month, however,
the capital cover of 16.85 percent approaches the danger
zone.
Most
banks see their capital adequacy ratios fall by 3
percentage-points starting next month under the strict
risk recognition guidelines issued under Basle 2 to more
or less 13 percent.
At the
individual bank level, most do not expect to put in
fresh capital to satisfy the Basle 2 standard except for
the banks already at or just above the 10-percent norm.
For
these borderline banks, the options are to borrow
capital or ask shareholders to put in more equity at the
risk of losing their license or their status demoted to
a lower ranking, including the loss of certain
privileges.
According to the BSP, the big commercial and universal
banks posted average capital adequacy of 18.5 percent,
higher than three months earlier at 17.45 percent.
Thrift
bank capital adequacy averaged only 16 percent, down
from 17.2 percent the previous September, due to a
decline in qualifying capital combined with a 4-percent
rise in risk-weighted assets during the period.
Rural
bank capital adequacy also fell to just 14.8 percent
from 15.7 percent for roughly the same factors affecting
thrift banks, the BSP said. |
