By LEE C. CHIPONGIAN
January 14, 2012, 11:23pm
MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) has issued a
memorandum incorporating Basel 3 principles on capital base that the BSP
will adopt in two years' time, ahead of schedule.
BSP Deputy Governor Nestor A. Espenilla Jr. in a memo letter said banks
should begin preliminary assessments on the potential impact of the
changes on capital base categorization under Basel 3.
The BSP issued Memorandum M-2012-002 in a resolution dated January 5 and
released January 10 which incorporated the capital base changes as
detailed in the existing regulation under Circular No. 538 of 2006.
Basel 3 standards, which the BSP will adopt as part of its risk-based
adequacy framework for universal and commercial banks includes adoption
of a new categorization of capital base such as tier 1 which will now be
common equity tier 1 (CET1) and the elimination of tier 2 capital.
In the meantime the memo said the existing limits on eligible hybrid
tier 1, lower tier and tier 2 capital will be removed while the BSP will
also adopt the regulatory deductions in Basel 3 such as deductions taken
out of CET1 capital in full as against the current practice of deducting
the same from tier 1 and tier 2 on a 50:50 basis.
The minimum capital ratio for CET1 is six percent, 7.5 percent for tier
1, and 2.5 percent for the capital conservation buffer. The minimum
capital adequacy ratio will still be 10 percent. Under Basel 3, the
minimum capital CET1 required ratio is 4.5 percent while for tier 1 it
is six percent. The CAR minimum is eight percent.
Espenilla said the draft of the Basel 3 implementing guidelines of the
BSP will be circulated this quarter for banks' comments and inputs. "The
final guidelines are intended to be issued by the third quarter of
2012," he said in the memo.
He added that this allow a one year parallel run that will allow banks
to transition between Basel 2 and Basel 3. "The BSP will release further
implementation plans and guidelines later (this year) covering other
aspects of Basel 3."
The new BSP guidelines, which will be released not later than April this
year, will adopt Basel 3 standards on the areas of capital and liquidity
in order to address "weaknesses brought to light by the global financial
crisis," according to a BSP report.
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