QuestionsQuestions (BSP CIRCULAR NO. 781)
Banks must maintain a risk-based capital ratio of not less than 10% on both a solo basis and consolidated basis.
The guidelines apply to all Universal Banks (UBs), Commercial Banks (KBs), their subsidiary banks, and Quasi-Banks (QBs).
The minimum capital ratios include a Common Equity Tier 1 (CET1) ratio of 6.0% and a Tier 1 capital ratio of 7.5%. Additionally, a capital conservation buffer of 2.5% comprised of CET1 capital is imposed.
The capital conservation buffer of 2.5% comprised of CET1 capital is meant to ensure banks maintain a cushion of capital above the minimum regulatory requirements to absorb losses during periods of financial and economic stress.
The guidelines took effect on January 1, 2014.
Existing capital instruments as of December 31, 2010, which do not meet the eligibility criteria will no longer be recognized as capital upon the effectivity of the circular. However, capital instruments issued before certain circulars are recognized as qualifying capital until December 31, 2015.
No. These banks continue to be subject to the existing applicable regulations on risk-based capital adequacy framework, but capital instruments issued by these banks must meet inclusion criteria specified in the manual appendices.
Section X115 Basel III Risk-Based Capital and parts of Appendix 63b covering Risk-Based Capital Adequacy Ratio, Qualifying Capital, Capital Conservation Buffer, Disclosure Requirements, and related sections were amended.
The guideline requires compliance both on a solo basis (head office plus branches) and on a consolidated basis (parent bank plus subsidiary financial allied undertakings, excluding insurance companies).
Appendix 63d of the MORB and Appendix 46c of the MORNBFI were deleted.