Banks’ CAR Improves in 2Q

Manila—(PHStocks)—Universal and commercial banks (U/KBs) posted capital adequacy ratios (CARs) of 15.48 percent and 16.42 percent on solo and consolidated bases at end-June this year, according to Bangko Sentral ng Pilipinas (BSP).

The end-June ratios are higher than the 15.07 percent and 16.10 percent CAR on solo and consolidated bases recorded a quarter earlier.

The latest CAR figures are also above the 15.45 percent and 16.35 percent ratios registered in March last year, which is the maiden reporting period for U/KBs under the Basel III framework.  This is an indication that the banks have adjusted to the impact of Basel III capital reforms.

The industry’s capital at the end-June this year is composed mainly of Common Equity Tier 1 (CET 1), which is the highest quality among instruments eligible as bank capital. The CET 1 of U/KBs represented 12.87 percent and 13.89 percent of risk weighted assets (RWAs) on solo and consolidated bases at end of the second quarter.

Tier 1 ratios also rose to 13.06 percent and 14.05 percent on solo and consolidated bases during said period. Tier 1 is composed of common equity and qualified capital instruments.

The increase was on account of the banks’ capital raising activities and earnings generated in the second quarter of 2015 which enabled the industry to raise its qualifying capital by 6 percent quarter-on-quarter to PhP 973.60 billion in June this year.

The CAR figures are an indication of the U/KBs’ continuous efforts to maintain adequate capital buffer against unexpected losses that may arise during times of stress. Well-capitalized banks are reflective of a resilient banking system that promotes financial stability, which is a key policy objective of the BSP.