Tetangco : PHL banking system remains sound, stable

Bangko Sentral ng Pilipinas (Wikipedia photo)

MANILA – The Philippines’ banking system “remains operationally sound and fundamentally strong,” despite the controversy being faced by some players, the Bangko Sentral ng Pilipinas (BSP) said Friday.

The strength is proven by mainstream indicators on capitalization, asset quality, and steady growth of assets, deposits and loans, it pointed out in a statement.

As of end-September 2015, the universal and commercial banks’ (U/KBs) capital adequacy ratio (CAR), a gauge of their financial soundness, stood at 15.5 percent.

Bulk, or 83 percent of their capitalization, is composed of Common Equity Tier 1 (CET1), which it cited as having “the highest quality among instruments eligible as bank capital.”

Non-performing loans (NPLs) remain low at only 1.6 percent of U/KBs’ total loan portfolio as of end-December 2015.

“The key foundation of the banking system’s strength has been the pursuit of pro-active reforms on risk management practices, capital build-up, corporate governance, financial inclusion, financial literacy and consumer protection,” the central bank said.

The BSP said it was mandated to implement a comprehensive risk-based approach that was aligned with international best practices, including the Basel Committee’s standards, which in turn was focused on assuring financial public of the safety and soundness of individual banks through periodic on-site and off-site supervisions.

“The BSP’s track record demonstrates the will to decisively act by meting sanctions on erring bank directors and officers, restricting imprudent activities, prohibiting unsafe or unsound practices, and even shutting down banks,” BSP Governor Amando Tetangco Jr. said.

He said the BSP continued to team-up with other government agencies to ensure financial stability as a prudential objective.

“On our own and as a collective body with other financial regulators, we have also focused specifically on the potential build-up of systemic risks,” he said.

“The issues that we have been assessing covers quite a bit of ground, but they are inter-related by the common strand that they can create co-mingled risks that can be systemic in nature,” he said.

Thus, the creation of the central bank’s Financial Stability Committee, which is composed of senior central bank officials; and the Financial Stability Coordination Council, which also include the Securities and Exchange Commission (SEC), Insurance Commission (IC), the Philippine Deposit Insurance Corporation (PDIC), the Department of Finance (DOF), and the Bureau of the Treasury (BTr).

Tetangco also noted that reform initiatives have encouraged more capital flows in the country, thus, the need to ensure a sound and responsive financial system.

“The BSP is very cognizant of the need to nurture financial stability but is also well aware that this must be aligned with the absolute objective of ensuring the integrity of the financial system,” he added.