Nine Philippine Thrift Banks Do Not Meet BSP's Minimum Capital Adequacy Ratios as of December 31, 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

The BSP issued new BASEL III Implementing Guidelines that will take effect on January 1, 2014. Under the new guidelines:

"Banks must now meet specific minimum thresholds for so-called Common Equity Tier 1 (CET1) capital and Tier 1 (T1) capital in addition to the Capital Adequacy Ratio (CAR). These regulatory thresholds effectively move banks worldwide to rely more on core capital instruments like CET1 and T1 issues. This is in lieu of hybrid instruments which did not fare well in the latest global crisis as far as absorbing losses. The ability to absorb losses is central to Basel III.

The BSP maintained the minimum Capital Adequacy Ratio (CAR) at 10.0 percent. In addition to CAR, the new framework sets a CET1 ratio of at least 6.0 percent and the Tier I capital ratio is at a minimum of 7.5 percent. 

The new guidelines also introduce a capital conservation buffer of 2.5 percent which shall be made up of CET1 capital. In addition, banks which issued capital instruments from 2011 will be allowed to count these instruments as Basel III-eligible until end-2015

Under these guidelines, several Philippine Thrift Banks currently do not meet these guidelines as of December 31, 2012.  The banks that fail to meet BSP's minimum capital requirements are as follows:

Total CAR

1. Inter-Asia Development Bank (Total CAR of -11.76)
2. The Real Bank Inc. (Total CAR of -1.55)
3. Enterprise Bank (Total CAR of 0.00)
4. The Palawan Bank, Inc. (Total CAR of 4.27)

Tier One CAR

1. The Real Bank Inc. (Tier One CAR of -1.55)
2. Business & Consumers Bank (Tier One CAR of 0.00)
3. Enterprise Bank (Tier One CAR of 0.00)
4. Equicom (Tier One CAR of 0.00)
5. Inter-Asia Development Bank (Tier One CAR of 0.00)
6. Maritime SLA (Tier One CAR of 0.00)
7. Optimum Development Bank (Tier One CAR of 0.00)
8. The Palawan Bank, Inc. (Tier One CAR of 4.27)
9. Planters Development Bank (Tier One CAR of 6.74)

It should be noted that Bataan SLA, which had a Tier One CAR of 0.00 as September 30, 2012 (see "Nine Philippine Thrift Banks Do Not Meet BSP's Minimum Capital Adequacy Ratios as of September 30, 2012"), had no Published Statement of Condition as of December 31, 2012.

The Total CAR and Tier 1 CAR of Philippine Thrift Banks as of December 31, 2012 is as follows (Banks that do not meet BSP's minimum capital requirements are highlighted in red):

Philippine Thrift Banking System
Total CAR
December 31, 2012
Bank	Total CAR
Inter-Asia Development Bank	-11.76
The Real Bank (A Thrift Bank) Inc.	-1.55
Enterprise Bank	0.00
The Palawan Bank, Inc.	4.27
Equicom SB	10.42
Silangan Savings and Loan Bank, Inc.	11.76
Citibank Savings Inc.	11.80
Planters Development Bank	12.61
University Savings Bank	13.93
Sterling Bank of Asia Inc.	14.16
BPI Family Savings Bank	14.58
RCBC Savings Bank	14.94
BPI Globe Banko Inc. Savings Bank	15.19
Opportunity Kauswagan Bank, Inc.	15.31
Philippine Resources Savings Banking Corporation	15.99
Wealth Bank - A Development Bank	16.09
Legazpi Savings Bank Inc.	16.18
World Partners Bank (A Thrift Bank)	16.34
Philippine Postal Savings Bank	16.40
City Savings Bank	16.45
Farmers Savings & Loan Bank	16.77
China Bank Savings	16.80
Philippine Savings Bank	17.14
BPI Direct Savings Bank	17.77
Village SLA, Inc.	18.08
Luzon Development Bank	18.25
Hiyas Savings & Loan Bank	19.75
Producers Savings Bank	20.15
Penbank, Inc.	20.79
HSBC Savings Bank (Phils) Inc.	21.57
Comsavings Bank	21.92
Philippine Business Bank	22.59
Dumaguete City Development Bank	22.79
Bataan Development Bank	24.21
Security Bank Savings Corporation	26.10
First Consolidated Bank	27.36
Malayan Bank Savings & Mortgage Bank	27.45
Allied Savings Bank	27.50
UCPB Savings Bank	28.37
Business & Consumers Bank	31.46
Life Savings Bank	31.48
Cordillera Savings Bank	32.19
Card SME Bank Inc. (A Thrift Bank)	33.32
Metro Cebu Public Savings Bank	35.52
Maritime SLA	36.10
Lemery Savings & Loan Bank, Inc.	38.90
Malasiqui Progressive SLB, Inc.	43.62
Northpoint Development Bank	43.80
Tong Yang Savings Bank Inc.	44.04
CityState Savings Bank	44.21
Pampanga Development Bank	48.54
Sampaguita SLA	48.99
The Queen City Development Bank	49.85
Optimum Development Bank	54.23
Microfinance Maximum SB (Maxbank)	54.63
Pridestar Development Bank	54.67
Pacific Ace Savings Bank	57.71
Dungganon Bank	59.00
Progress SLA	61.83
Tower Development Bank	65.08
Quezon Coconut Producers SLB Inc.	66.95
Sun Savings Bank	69.02
Bank One Savings and Trust Corp.	81.17
United Overseas Bank Philippines	83.67
Merchants Savings & Loan Association Inc.	98.57
Century Savings Bank	109.01
BDO Elite Savings Bank	239.61
Isla Bank (A Thrift Bank) Inc.	331.68
Iloilo City Development Bank	386.24
Bataan SLA	NA

Source: www.bsp.gov.ph

Philippine Thrift Banking System
Tier 1 CAR
December 31, 2012
Bank	Tier 1 CAR
The Real Bank (A Thrift Bank) Inc.	-1.55
Business & Consumers Bank	0.00
Enterprise Bank	0.00
Equicom SB	0.00
Inter-Asia Development Bank	0.00
Maritime SLA	0.00
Optimum Development Bank	0.00
The Palawan Bank, Inc.	4.27
Planters Development Bank	6.74
Legazpi Savings Bank Inc.	8.09
Sterling Bank of Asia Inc.	10.03
Citibank Savings Inc.	11.03
Silangan Savings and Loan Bank, Inc.	11.76
China Bank Savings	12.93
Philippine Savings Bank	13.63
BPI Family Savings Bank	13.71
Philippine Resources Savings Banking Corporation	14.21
RCBC Savings Bank	14.35
BPI Globe Banko Inc. Savings Bank	14.37
Wealth Bank - A Development Bank	15.30
World Partners Bank (A Thrift Bank)	15.38
Philippine Postal Savings Bank	15.42
City Savings Bank	15.55
Farmers Savings & Loan Bank	15.97
BPI Direct Savings Bank	16.89
Luzon Development Bank	17.05
Producers Savings Bank	17.63
Village SLA, Inc.	18.08
Hiyas Savings & Loan Bank	19.45
Penbank, Inc.	20.01
HSBC Savings Bank (Phils) Inc.	20.87
Philippine Business Bank	21.80
Dumaguete City Development Bank	22.39
Comsavings Bank	22.56
Bataan Development Bank	23.49
Security Bank Savings Corporation	25.27
Allied Savings Bank	26.81
Malayan Bank Savings & Mortgage Bank	26.92
First Consolidated Bank	27.36
UCPB Savings Bank	27.58
Cordillera Savings Bank	31.73
Metro Cebu Public Savings Bank	35.11
Lemery Savings & Loan Bank, Inc.	38.52
Malasiqui Progressive SLB, Inc.	43.41
University Savings Bank	43.52
Northpoint Development Bank	43.80
Tong Yang Savings Bank Inc.	44.04
CityState Savings Bank	44.09
The Queen City Development Bank	49.28
Sampaguita SLA	50.40
Quezon Coconut Producers SLB Inc.	56.80
Pacific Ace Savings Bank	57.48
Dungganon Bank	58.18
Progress SLA	61.83
Microfinance Maximum SB (Maxbank)	61.84
Life Savings Bank	64.86
Pridestar Development Bank	66.66
Sun Savings Bank	68.04
Opportunity Kauswagan Bank, Inc.	70.57
Bank One Savings and Trust Corp.	80.50
United Overseas Bank Philippines	83.30
Merchants Savings & Loan Association Inc.	98.45
Iloilo City Development Bank	99.77
Century Savings Bank	107.14
Pampanga Development Bank	110.54
Tower Development Bank	111.00
Card SME Bank Inc. (A Thrift Bank)	203.07
BDO Elite Savings Bank	239.61
Isla Bank (A Thrift Bank) Inc.	331.36
Bataan SLA	NA

Source: www.bsp.gov.ph