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Bacolod City, PhilippinesFriday, September 7, 2012
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‘BASEL 3 not only
about strong capital’

MANILA – Banks are scurrying to increase capital in preparation of the 2014 implementation of BASEL 3 in the Philippines but a central bank official yesterday said this should not be the only focus by banks but on how to manage their risks, a government press release said.

Bangko Sentral ng Pilipinas Deputy Governor Nestor Espenilla Jr. told delegates of the Philippine International Banking Convention 2012 in Makati that the latest reforms in the risk-based supervision of the banking sector tells banks to prepare for eventualities.

Espenilla said, BASEL 3 reforms is not just adding more capital but instead requires you that you should manage your risk.

BASEL 3 is the latest modification developed by the Basel Committee on Banking Supervision, which was set forth of the Bank of International Settlement, strengthen the regulation, supervision and risk management of the banking sector.

According to the BIS website BASEL 3 aims to improve the banking sector's ability to absorb shocks arising from financial and economic stress, whatever the source; improve risk management and governance; strengthen banks' transparency and disclosures.

The third modification in the BASEL rules targets to increase resilience of banks in periods of stress through bank-level regulations and through macro level by addressing risks that can build up across the banking sector.

The BCBS has outlined a staggered implementation of BASEL 3 from 2016 to 2018 but BSP’s policy-making Monetary Board has decided to implement it in full by January 2014 for universal and commercial banks as it “recognizes the present strong capital position of the banking industry while providing for a reasonable transition period.”

For BASEL 3, the BSP has set a six percent minimum requirement for Common Equity Tier 1 ratio and 7.5 percent minimum for total Tier 1 ratio, both of which are higher than the BIS’s requirement of 4.5 percent and six percent for CET1 and total Tier 1, respectively.

In preparation for the 2014 BASEL 3 implementation, the BSP will distribute to U/KBs this month discussion papers that the central bank expects to get back after about 90 days.*PNA


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