The Bangko Sentral ng Pilipinas (BSP) said on Monday so-called stand-alone thrift and rural banks maintain sufficient capital in relation to their risk-weighted assets as a result of stringent rules imposed on the industry some two years earlier.
The central bank said stand-alone thrift and rural banks—or banks that are not subsidiaries of any universal or commercial bank in the country—maintain “solid” capital adequacy ratios (CAR) in the period covering March 2012 to end-December 2013.
This marked the first time that the central bank released the CAR standing of stand-alone thrift and rural banks in the country since the implementation of the so-called Basel 1.5 Framework for the industry.
In particular, the stand-alone thrift banks’ capital position over the two-year period averaged 17.69 percent to 22.02 percent on a solo basis. For stand-alone rural banks, their two-year standing show CAR ranging from 17.98 percent to 20.67 percent during the period.
At this CAR level, the BSP said stand-alone banks “showed general compliance with the CAR under the Basel 1.5 Framework” and is an indicator that capitalization of smaller banks remained “stable and solid.”
The CAR of smaller banks, likewise, proved larger compared to the CAR of the universal and commercial banks in the country—which already significantly surpassed the central bank’s minimum CAR requirement.
At the start of the Basel 3 implementation for the big banks, the universal and commercial lenders reported a CAR of 15.94 percent on solo basis, well above the 10-percent CAR threshold of the BSP, according to the central bank data as of end-June this year.
“The CARs of the banking system as a whole, which composed of the CARs of different bank categories indicate the industry’s continued efforts to maintain robust capitalization. A strong capital position promotes financial stability by providing individual banks and the industry with an adequate buffer against unexpected losses that may arise during times of stress,” the BSP said.
The Basel 1.5 framework was implemented in to stand-alone thrift and rural banks in the country in 2012. It is a simplified version of Basel 2, and was chosen by the central bank to be the practicing standard of the thrift and rural banking industry “in view of the simple operations of stand-alone banks.”