Seven Philippine Thrift Banks Do Not Meet BSP's Minimum Capital Adequacy Ratios as of June 30, 2012

A bank's Capital Adequacy Ratio is a measure of a bank's capital and financial strength.  It is expressed as a percentage of a bank's risk weighted credit exposures.  It is also known as the "Capital to Risk Weighted Assets Ratio (CRAR).

The general formula is as follows:

CAR = (Tier 1 Capital + Tier 2 Capital)/Risk Weighted Assets

Tier 1 Capital

Tier 1 CAR is the ratio of a bank's core or equity capital to its total risk-weighted assets.  It measures financial strength from a regulator's point of view. Tier 1 Capital measures the bank's ability to absorb losses without a bank being required to cease trading.

The formula for Tier 1 Capital is as follows:

Tier 1 Capital = (Paid-up Capital + Statutory Reserves + Disclosed Free Reserves) - (Equity Investments in Subsidiary + Intangible Assets + Current & B/F losses)

Tier 1 CAR = Tier 1 Capital/Risk Weighted Assets

Tier 2 Capital

Tier 2 Capital is supplementary capital.  It measures the ability of a bank to absorb losses in the event of a winding up and so it provides a lesser degree of protection to depositors.

The formula for Tier 2 Capital is as follows:

 Tier 2 Capital = Undisclosed Reserves + General Loss Reserves + Hybrid Debt Capital Instruments and Subordinated Debts.

Risk Weighted Assets

Risk Weighted Assets are a bank's on balance sheet assets and off-balance sheet exposures, weighted according to risk.  Different classes of assets have different risk weightings.  For instance, cash on hand or a government bond has zero risk weighting and are subtracted from the total risk assets.  A loan would have a 100% risk weighthing - it would be counted towards the total risk assets of the bank.

More information about this can be found here.

Minimum Capital Requirements

International Guidelines

Basel III is the global requlatory standard on bank capital adequacy, stress testing, and market liquidity risk agreed upon by the members of the Basel Committee on Banking Supervision.

Under Basel III, the minimum Common Equity Tier 1 Capital Ratio is 4.5%, Tier 1 Capital Ratio is 6.0%, conservation buffer is 2.5%, and the minimum Total CAR is 8.0%.

For more information on Basel III, read this.

BSP Guidelines

BSP Guidelines are somewhat stricter than Basel III.  Under the new BSP Guidelines conforming to Basel III, the minimum Common Equity Tier 1 Capital Ratio is  6.0%, Tier 1 Capital Ratio is 7.5%, conservation buffer is still 2.5%, and the minimum Total CAR is 10.0%.  See "BSP Issues Basel 3 Memorandum on Banks' Capital Base Standards" for more information.

Under these guidelines, several Philippine Thrift Banks currently do not meet these guidelines as of June 30, 2012.  Distressed Banks are highlighted in yellow.  For more information on distressed thrift banks, please check out a previous blog post: ""Philippine Thrift Banks Continue to Improve in the 2nd Quarter of 2012".  The banks that fail to meet BSP's minimum capital requirements are as follows:

Total CAR

1. Bataan SLA (Total CAR of 0.0)
2. Metro Cebu Public Savings Bank (Total CAR of 0.0)
3. Legazpi Savings Bank, Inc. (Total CAR of 8.21)

Tier One CAR

1. Bataan SLA (Tier One CAR of 0.0)
2. Business & Consumers Bank (Tier One CAR of 0.0)
3. Equicom SB (Tier One CAR of 0.0)
4. Maritime SLA (Tier One CAR of 0.0)
5. Optimum Development Bank (Tier One CAR of 0.0)
6. Legazpi Savings Bank, Inc. (Tier One CAR of 6.37)
7. Planters Development Bank (Tier One CAR of 7.92)

Philippine Thrift Banking System
Total CAR
June 30, 2012
Bank	Total CAR
Bataan SLA	0.00
Metro Cebu Public Savings Bank	0.00
Legazpi Savings Bank Inc.	8.21
Equicom SB	10.00
Silangan Savings and Loan Bank, Inc.	10.88
Citibank Savings Inc.	11.77
University Savings Bank	12.75
BPI Family Savings Bank	13.76
RCBC Savings Bank	14.00
Planters Development Bank	14.14
Sterling Bank of Asia Inc.	14.16
Opportunity Kauswagan Bank, Inc.	14.77
City Savings Bank	14.83
World Partners Bank (A Thrift Bank)	15.29
Farmers Savings & Loan Bank	15.98
Luzon Development Bank	16.96
Philippine Resources Savings Banking Corporation	16.99
BPI Direct Savings Bank	17.66
Philippine Savings Bank	17.96
Philippine Postal Savings Bank	17.97
BPI Globe Banko Inc. Savings Bank	18.00
Village SLA, Inc.	18.66
Security Bank Savings Corporation	18.93
HSBC Savings Bank (Phils) Inc.	19.38
Cordillera Savings Bank	19.52
Hiyas Savings & Loan Bank	19.78
Penbank, Inc.	20.12
China Bank Savings	20.26
Producers Savings Bank	20.34
Wealth Bank - A Development Bank	20.94
Comsavings Bank	21.51
Philippine Business Bank	21.58
First Consolidated Bank	21.88
Dumaguete City Development Bank	24.95
Malayan Bank Savings & Mortgage Bank	25.26
Card SME Bank Inc. (A Thrift Bank)	26.88
Business & Consumers Bank	27.53
Bataan Development Bank	28.85
Allied Savings Bank	29.55
UCPB Savings Bank	30.53
Life Savings Bank	31.94
Lemery Savings & Loan Bank, Inc.	37.49
Maritime SLA	39.35
Tong Yang Savings Bank Inc.	39.94
Malasiqui Progressive SLB, Inc.	40.59
The Queen City Development Bank	41.67
Pampanga Development Bank	48.97
Pridestar Development Bank	53.54
Pacific Ace Savings Bank	54.01
Sampaguita SLA	55.89
CityState Savings Bank	56.24
Optimum Development Bank	59.34
Microfinance Maximum SB (Maxbank)	60.73
Tower Development Bank	61.82
Dungganon Bank	66.56
Bank One Savings and Trust Corp.	77.03
Quezon Coconut Producers SLB Inc.	80.41
Progress SLA	104.44
United Overseas Bank Philippines	105.83
Merchants Savings & Loan Association Inc.	108.04
Century Savings Bank	108.40
Northpoint Development Bank	119.18
Iloilo City Development Bank	299.70
Isla Bank (A Thrift Bank) Inc.	312.65
Sun Savings Bank	360.87
BDO Elite Savings Bank	1,634.13
Liberty Savings Bank	NA
Real Bank (A Thrift Bank) Inc.	NA

Source: www.bsp.gov.ph

Philippine Thrift Banking System
Tier One CAR
June 30, 2012
Bank	Tier One CAR
Bataan SLA	0.00
Business & Consumers Bank	0.00
Equicom SB	0.00
Maritime SLA	0.00
Optimum Development Bank	0.00
Legazpi Savings Bank Inc.	6.37
Planters Development Bank	7.92
Sterling Bank of Asia Inc.	9.67
Silangan Savings and Loan Bank, Inc.	10.88
Citibank Savings Inc.	11.01
BPI Family Savings Bank	12.89
RCBC Savings Bank	13.41
City Savings Bank	13.86
Philippine Savings Bank	14.15
World Partners Bank (A Thrift Bank)	14.41
Philippine Resources Savings Banking Corporation	15.07
Farmers Savings & Loan Bank	15.18
Luzon Development Bank	16.69
BPI Direct Savings Bank	16.77
Philippine Postal Savings Bank	16.98
BPI Globe Banko Inc. Savings Bank	17.04
Producers Savings Bank	17.32
Village SLA, Inc.	18.66
HSBC Savings Bank (Phils) Inc.	18.68
Cordillera Savings Bank	19.10
Hiyas Savings & Loan Bank	19.47
Security Bank Savings Corporation	19.52
Wealth Bank - A Development Bank	20.03
Comsavings Bank	21.00
Philippine Business Bank	21.58
First Consolidated Bank	21.88
Dumaguete City Development Bank	24.60
Malayan Bank Savings & Mortgage Bank	24.74
China Bank Savings	25.54
Allied Savings Bank	28.88
Bataan Development Bank	29.45
UCPB Savings Bank	29.76
Metro Cebu Public Savings Bank	36.48
Lemery Savings & Loan Bank, Inc.	37.13
Tong Yang Savings Bank Inc.	39.94
Malasiqui Progressive SLB, Inc.	40.40
The Queen City Development Bank	41.30
University Savings Bank	42.20
Pacific Ace Savings Bank	53.90
Sampaguita SLA	55.39
CityState Savings Bank	55.65
Quezon Coconut Producers SLB Inc.	57.58
Opportunity Kauswagan Bank, Inc.	57.84
Microfinance Maximum SB (Maxbank)	61.95
Life Savings Bank	62.04
Dungganon Bank	64.81
Pridestar Development Bank	65.86
Sun Savings Bank	71.66
Bank One Savings and Trust Corp.	76.38
Iloilo City Development Bank	93.73
Progress SLA	104.44
Pampanga Development Bank	104.72
United Overseas Bank Philippines	105.83
Century Savings Bank	106.93
Merchants Savings & Loan Association Inc.	107.93
Tower Development Bank	111.25
Northpoint Development Bank	119.18
Card SME Bank Inc. (A Thrift Bank)	179.11
Isla Bank (A Thrift Bank) Inc.	312.35
BDO Elite Savings Bank	1,634.13
Liberty Savings Bank	NA
Penbank, Inc.	NA
Real Bank (A Thrift Bank) Inc.	NA

Source: www.bsp.gov.ph