Fitch: PH bank rules improving

ABS-CBN News

Posted at Aug 15 2012 06:48 PM | Updated as of Aug 16 2012 02:48 AM

MANILA, Philippines - Fitch Ratings praised improvements in bank regulations in the Philippines, but structural issues remain.

In its report "Philippine Banking Prudential Regulations", Fitch said regulations issued by the Bangko Sentral ng Pilipinas will help the banking industry's stability.

Among the regulations issued by the BSP are the tighter definition of an independent director and minimum composition of independent directors for local banks at 20%.

"Fitch expects corporate governance quality in the Philippines to evolve gradually, which may help to somewhat address common concerns associated with bank ownership by a few family-owned conglomerates," it said.

Fitch anticipates most major Philippine banks will still face high corporate loan concentration.

"Hence (PH banks) may be quite vulnerable to asset quality shocks, especially in a protracted downturn. The central bank had raised the single-borrower limits for certain priority segments in 2009-2011, and this could amplify loan concentration risk, although Fitch understands that most rated-banks are still adhering to the 'norm' of a single-borrower limit of 25% of capital," it said.

Fitch also noted said Philippine banks are not expected to be too affected by the transition to the Basel III framework, since most are well-capitalized and have liquid balance sheets.