Eight Philippine Thrift Banks Do Not Meet BSP's Minimum Capital Adequacy Ratios as of March 31, 2013

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 March 31, 2013.  The banks that fail to meet BSP's minimum capital requirements are as follows:

Total CAR

1. Bataan SLA (Total CAR of 0.00)
2. Enterprise Bank (Total CAR of 0.00)
3. The Palawan Bank, Inc. (Total CAR of 6.28)
4. Equicom Savings Bank, Inc. (Total CAR of 9.47)

Tier One CAR

1. Bataan SLA (Tier One CAR of 0.00)
2. Business & Consumers Bank (Tier One CAR of 0.00)
3. Enterprise Bank (Tier One CAR of 0.00)
4. Equicom Savings Bank, Inc. (Tier One CAR of 0.00)
5. Maritime Savings Bank Corporation (Tier One CAR of 0.00)
6. Optimum Development Bank (Tier One CAR of 0.00)
7. The Palawan Bank, Inc. (Tier One CAR of 3.86)
8. Planters Development Bank (Tier One CAR of 6.45)

It should be noted that two banks, namely, The Real Bank Inc. (which had a Total CAR of -1.55 and a Tier One CAR of -1.55) and Inter-Asia Development Bank (which had a Total CAR of -11.76 and a Tier One CAR of 0.00) as of December 31, 2012 (see "Nine Philippine Thrift Banks Do Not Meet BSP's Minimum Capital Adequacy Ratios as of December 31, 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 March 31, 2012 is as follows (Banks that do not meet BSP's minimum capital requirements are highlighted in red):

Philippine Thrift Banking System
Capital Adequacy Ratios
Total CAR
March 31, 2013
Bank	Total CAR
Bataan SLA	0.00
Enterprise Bank Inc.	0.00
The Palawan Bank	6.28
Equicom Savings Bank, Inc.	9.47
Silangan Savings and Loan Bank, Inc.	10.25
Opportunity Kauswagan Bank	10.61
Citibank Savings, Inc.	11.23
Planters Development Bank	12.12
University Savings Bank, Inc.	13.36
China Bank Savings, Inc.	13.65
World Partners Bank	13.89
City Savings Bank, Inc.	14.34
Philippine Postal Savings Bank, Inc.	14.55
BPI Family Savings Bank, Inc.	15.13
Sterling Bank of Asia, Inc.	15.25
Wealth Development Bank Corporation	15.39
RCBC Savings Bank, Inc.	15.45
Farmers Savings and Loan Bank, Inc.	15.59
Philippine Resources Savings Banking Corporation	16.40
BPI Direct Savings Bank, Inc.	16.65
Luzon Development Bank	17.37
BPI Globe BanKO, Inc.	17.59
Village Bank, Inc.	17.81
Hiyas Banking Corporation	18.16
HSBC Savings Bank (Phils), Inc.	18.31
Philippine Savings Bank	18.60
Penbank, Inc.	20.03
Bataan Development Bank	20.30
Producers Savings Bank Corporation	20.60
Security Bank Savings Corporation	22.13
Dumaguete City Development Bank	22.23
Malayan Bank Savings & Mortgage Bank	23.93
Comsavings Bank	24.23
First Consolidated Bank, Inc.	26.32
Allied Savings Bank	26.91
UCPB Savings Bank	27.05
Cordillera Savings Bank	27.51
Card SME Bank, Inc.	27.55
Business and Consumers Bank	29.03
Philippine Business Bank	30.53
Northpoint Development Bank	31.14
Life Savings Bank, Inc.	32.66
Maritime Savings Bank Corporation	33.05
Metro Cebu Public Savings Bank	33.81
Lemery Savings and Loan Bank, Inc.	34.07
CityState Savings Bank Inc.	38.44
Microfinance Maximum Savings Bank	40.52
Tong Yang Savings Bank, Inc.	40.72
Pampanga Development Bank	41.62
Malasiqui Progressive Savings and Loan Bank	42.46
Pride Star Development Bank, Inc.	49.14
Sampaguita Savings Bank, Inc.	49.62
Queen City Development Bank	49.82
Pacific Ace Savings Bank, Inc.	53.86
Dungganon Bank	55.64
Tower Development Bank	58.47
Progress Savings and Loan Bank, Inc.	60.73
Bank One Savings and Trust Corporation	67.28
Optimum Development Bank, Inc.	69.71
Quezon Coconut Producers Savings and Loan Bank	72.12
Sun Savings Bank, Inc.	72.22
United Overseas Bank Philippines	74.69
Merchants Savings and Loan Association, Inc.	98.36
Century Savings Banking Corporation	102.58
Isla Bank	273.75
Iloilo City Development Bank	399.62
BDO Elite Savings Bank, Inc.	518.24

Source: www.bsp.gov.ph

Philippine Thrift Banking System
Capital Adequacy Ratios
Tier 1 CAR
March 31, 2013
Bank	Tier 1 CAR
Bataan SLA	0.00
Business and Consumers Bank	0.00
Enterprise Bank Inc.	0.00
Equicom Savings Bank, Inc.	0.00
Maritime Savings Bank Corporation	0.00
Optimum Development Bank, Inc.	0.00
The Palawan Bank	3.86
Planters Development Bank	6.45
China Bank Savings, Inc.	10.24
Silangan Savings and Loan Bank, Inc.	10.25
Citibank Savings, Inc.	10.44
Sterling Bank of Asia, Inc.	11.42
City Savings Bank, Inc.	13.50
World Partners Bank	13.50
BPI Family Savings Bank, Inc.	14.26
Philippine Postal Savings Bank, Inc.	14.41
Wealth Development Bank Corporation	14.63
RCBC Savings Bank, Inc.	14.86
Farmers Savings and Loan Bank, Inc.	14.90
Philippine Resources Savings Banking Corporation	15.03
Philippine Savings Bank	15.15
BPI Direct Savings Bank, Inc.	15.80
Luzon Development Bank	16.22
BPI Globe BanKO, Inc.	16.72
HSBC Savings Bank (Phils), Inc.	17.54
Village Bank, Inc.	17.81
Hiyas Banking Corporation	17.87
Penbank, Inc.	19.32
Bataan Development Bank	19.67
Producers Savings Bank Corporation	20.33
Security Bank Savings Corporation	21.21
Dumaguete City Development Bank	21.83
Malayan Bank Savings & Mortgage Bank	23.47
Comsavings Bank	25.36
Allied Savings Bank	26.21
First Consolidated Bank, Inc.	26.32
UCPB Savings Bank	26.32
Cordillera Savings Bank	27.09
Philippine Business Bank	30.02
Northpoint Development Bank	31.14
Metro Cebu Public Savings Bank	33.28
Lemery Savings and Loan Bank, Inc.	33.72
CityState Savings Bank Inc.	37.85
Tong Yang Savings Bank, Inc.	40.72
Malasiqui Progressive Savings and Loan Bank	42.27
University Savings Bank, Inc.	44.04
Queen City Development Bank	49.25
Opportunity Kauswagan Bank	49.38
Sampaguita Savings Bank, Inc.	49.51
Pacific Ace Savings Bank, Inc.	53.69
Dungganon Bank	54.90
Quezon Coconut Producers Savings and Loan Bank	58.04
Microfinance Maximum Savings Bank	58.75
Progress Savings and Loan Bank, Inc.	60.73
Life Savings Bank, Inc.	63.23
Bank One Savings and Trust Corporation	66.72
Pride Star Development Bank, Inc.	68.08
Sun Savings Bank, Inc.	71.29
United Overseas Bank Philippines	74.36
Merchants Savings and Loan Association, Inc.	98.20
Century Savings Banking Corporation	101.14
Tower Development Bank	112.19
Pampanga Development Bank	117.71
Iloilo City Development Bank	120.60
Card SME Bank, Inc.	208.14
Isla Bank	273.48
BDO Elite Savings Bank, Inc.	518.24

Source: www.bsp.gov.ph