BSP tells banks to shape up, or face scrutiny

BSP tells banks to shape up, or face scrutiny

Banks should focus on risk management and good governance to sustain the Philippines’ financial sector, or face more intensive scrutiny, a Bangko Sentral ng Pilipinas (BSP) official on Thursday said.

In an interview, BSP Deputy Gov. Nestor Espenilla Jr. said authorities would discuss with banks the “appropriate" governance standards under Basel III, a new agreement to reform the banking industry to avoid a repeat of the 2008 global financial crisis.

The central bank will likely implement the good governance standards within the year, Espenilla said.

Banks that will not heed the BSP better brace themselves for more intensive scrutiny, he added.

Bank authorities are set to implement the second phase of reforms pertaining to capital ratios under Basel III.

The central bank has already issued guidelines on the risk-based capital adequacy framework that would help Philippine banks comply with the higher capital standards.

Last month, the BSP adopted new criteria for capital instruments after issuing a moratorium on the fund-raising activities of banks until Dec. 31 last year.

Under the Basel III standards, banks must hold a core tier-one capital of 4.5 percent from 2 percent under previous agreements.

Capital conservation buffer

A further capital conservation buffer would also be required, bringing to 7 percent the total capital-to-assets ratio that banks must hold, the central bank said.

Banks would have less than five years to comply with the minimum ratios, and until January 2011 to meet the buffer requirements.

Banks are currently required to have common equity equal to 2 percent of total assets and 4 percent tier-one capital.

Basel III gave banks until the end of 2017 to comply with the tighter definitions of capital, and a new short-term liquidity standard would not be implemented until 2015 begins.

While a separate long-term liquidity rule has been shelved under pressure from the banking industry, the short-term rule was expected to be in effect earlier.

The two liquidity rules would require banks to hold enough cash and easily cashable assets to meet liabilities. — JE/PE/VS, GMANews.TV

--
---------------------------------------------
CARLOS ANI - SEEDFINANCE Corporation - http://www.seedfinance.net
Email: carlosani@seedfinance.net
Landline: +63495010127 Cellphone: +639152919580
DEVJOBS - http://www.devjobsmail.com
PHILDEVFINANCE - http://phildevfinance.posterous.com http://phildevfinance.wordpress.com
CONSULTING - http://www.carlosani.com
My Clippings - http://www.myclipps.posterous.com
------------------------------------------