PH banks among healthiest in Asia-Pacific

By Ted P. Torres, The Philippine Star

Posted at Oct 19 2012 07:50 AM | Updated as of Oct 19 2012 07:29 PM

MANILA, Philippines - Banks in the Philippines are among the healthiest in Asia-Pacific, according to a prestigious financial publication.

The Asian Banker (TAB) said Philippine banks have a high weighted average equity-to-asset ratio, as equity forms the base for the capital adequacy ratio (CAR).

The Bangko Sentral ng Pilipinas (BSP) has set a higher standard for risk to capital or a minimum requirement for total CAR of 10 percent and Tier 1 CAR of 7.5 percent as compared to eight percent and six percent, respectively, for Basel 3, the global standard.

“This is higher than the required total CAR for some other countries like eight percent for Vietnam and New Zealand, and 8.5 percent for Thailand,” the financial publication said.

It added that the BSP is again poised to impose stricter capitalization requirements under the Basel 3 framework starting January 2013, ahead of the 2014 schedule to be observed by most central banks.

The ahead-of-schedule move of the BSP led many banks to raise equity levels in 2011 for sufficient capital to meet requirements and not be constrained on growth in coming years.

The assessment of the Philippine banks was embodied in TAB’s annual report -- The Asian Banker 500 – which likewise saw Asia Pacific banks shoring up their capital positions as implementation of the new Basel 3 requirements draws near.

It said that asset-weighted average Tier 1 and total CAR grew much stronger to 14 percent and 16.5 percent in 2011 from 9.1 percent and 12.3 percent in 2010, respectively.

Singapore and Philippine banks ranked among the highest for Tier 1 and Total CAR, respectively. The former is due to the stricter capital requirements than recommended by Basel 3.

Vietnamese banks saw a significant increase in their total CAR from 11.2 percent in 2010 to 12.5 percent last year to comply with the increased regulatory requirements.

TAB however, warned that short term risks in liquidity continue to be one of the top issues for Asia Pacific banks.

TAB research manager Doron Foo said some banks in countries such as Australia, Singapore and Hong Kong are still unable to satisfy Basel 3 liquidity requirements (liquidity coverage ratio) due to the lack of sovereign debt in their countries.

Average weighted liquidity measurement continued to reach a new peak of 23.3 percent in 2011 from 16.6 percent in 2010.

“Currently, these countries are actively looking for alternatives such as covered bonds but no concrete solution has emerged,” he added.