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 Banks currently do not meet these guidelines as of March 31, 2014. The banks that fail to meet BSP's minimum capital requirements are as follows:
TOTAL CAR
- Bataan Savings and Loan Bank (Total CAR of 0.00%)
- The Real Bank (Total CAR of 3.94%)
- BPI Globe Banko Inc. (Total CAR of 6.77%)
- The Palawan Bank (Total CAR of 7.53%)
- Planters Development Bank (Total CAR of 8.32%)
- Rizal Commercial Banking Corporation (Total CAR of 9.91%)
Tier One CAR
- 1st Valley Bank (Tier One CAR of 0.00%)
- Bataan Savings and Loan Bank (Tier One CAR of 0.00%)
- Business & Consumers Bank (Tier One CAR of 0.00%)
- Enterprise Bank Inc. (Tier One CAR of 0.00%)
- Equicom Savings Bank, Inc. (Tier One CAR of 0.00%)
- Inter-Asia Development Bank (Tier One CAR of 0.00%)
- Maritime Savings Bank Corporation (Tier One CAR of 0.00%)
- Optimum Development Bank (Tier One CAR of 0.00%)
- The Real Bank (Tier One CAR of 3.04%)
- Planters Development Bank (Tier One CAR of 4.16%)
- BPI Globe Banko Inc. (Tier One CAR of 6.15%)
- Philippine Bank of Communications (Tier One CAR of 6.74%)
- The Palawan Bank (Tier One CAR of 7.10%)
- Sterling Bank of Asia Inc. (Tier One CAR of 8.03%)
- Security Bank Savings Corporation (Tier One CAR of 9.62%)
The Total CAR and Tier 1 CAR of Philippine Banks as of March 31, 2014 is as follows:(Banks that do not meet BSP's minimum capital requirements are highlighted in yellow):
| Philippine Banking System | ||
| TOTAL CAR | ||
| March 31, 2014 | ||
| Type of Bank | Total CAR | |
| BATAAN SAVINGS AND LOAN BANK | Thrift | 0.00 |
| THE REAL BANK (A THRIFT BANK) INC | Thrift | 3.94 |
| BPI GLOBE BANKO INC A SAVINGS BANK | Thrift | 6.77 |
| THE PALAWAN BANK (PALAWAN DB) INC | Thrift | 7.53 |
| PLANTERS DEVELOPMENT BANK | Thrift | 8.32 |
| RIZAL COMM'L BANKING CORP | U/KB | 9.91 |
| UNITED COCONUT PLANTERS BANK | U/KB | 10.16 |
| EQUICOM SAVINGS BANK INC | Thrift | 10.25 |
| SECURITY BANK SAVINGS CORPORATION | Thrift | 10.51 |
| COMSAVINGS BANK | Thrift | 10.68 |
| PHIL BANK OF COMMUNICATIONS | U/KB | 10.80 |
| UNION BANK OF THE PHILS | U/KB | 11.21 |
| ALLIED SAVINGS BANK | Thrift | 11.70 |
| ENTERPRISE BANK INC (A THRIFT BANK) | Thrift | 12.11 |
| RCBC SAVINGS BANK INC | Thrift | 12.12 |
| EAST WEST BANKING CORP | U/KB | 12.16 |
| STANDARD CHARTERED BANK | U/KB | 12.55 |
| STERLING BANK OF ASIA INC (A SAVINGS | Thrift | 12.75 |
| SECURITY BANK CORP | U/KB | 13.21 |
| PHIL POSTAL SAVINGS BANK INC | Thrift | 13.31 |
| BDO UNIBANK INC | U/KB | 13.32 |
| WEALTH DEVELOPMENT BANK CORPORATION | Thrift | 13.55 |
| CHINA BANKING CORP | U/KB | 13.66 |
| LAND BANK OF THE PHILIPPINES | U/KB | 13.68 |
| WORLD PARTNERS BANK (A THRIFT BANK) | Thrift | 13.69 |
| PENBANK INC (A PDB) (FORMERLY: PENINSULA | Thrift | 13.78 |
| CHINA BANK SAVINGS INC | Thrift | 13.99 |
| METROPOLITAN BANK & TCO | U/KB | 14.04 |
| BPI FAMILY SAVINGS BANK INC | Thrift | 14.05 |
| OPPORTUNITY KAUSWAGAN BANK INC (A MICROFINANCE | Thrift | 14.17 |
| LUZON DEVELOPMENT BANK | Thrift | 14.94 |
| BANK OF THE PHIL ISLANDS | U/KB | 15.09 |
| 1ST VALLEY BANK INC A DEVELOPMENT BANK | Thrift | 15.45 |
| PHILIPPINE RESOURCES SAVINGS BANKING | Thrift | 16.02 |
| ASIA UNITED BANK CORPORATION | U/KB | 16.06 |
| PHIL SAVINGS BANK | Thrift | 16.38 |
| PHIL NATIONAL BANK | U/KB | 16.51 |
| HIYAS BANKING CORPORATION | Thrift | 16.66 |
| HONGKONG & SHANGHAI BANKING CORP | U/KB | 16.71 |
| LEGAZPI SAVINGS BANK INC | Thrift | 17.21 |
| FARMERS SAVINGS & LOAN BANK INC | Thrift | 17.24 |
| BATAAN DEVELOPMENT BANK | Thrift | 17.42 |
| NORTHPOINT DEV'T BANK INC | Thrift | 17.50 |
| VILLAGE BANK INC (A THRIFT BANK) | Thrift | 17.58 |
| PRODUCERS SAVINGS BANK CORPORATION | Thrift | 17.88 |
| DEVELOPMENT BANK OF THE PHIL | U/KB | 18.51 |
| BPI DIRECT SAVINGS BANK INC | Thrift | 19.24 |
| MAYBANK PHILIPPINES INC | U/KB | 19.69 |
| MALAYAN BANK SAVINGS AND MORT BANK INC | Thrift | 19.94 |
| PHILIPPINE VETERANS BANK | U/KB | 20.16 |
| BANK OF COMMERCE | U/KB | 20.88 |
| ROBINSONS BANK CORPORATION | U/KB | 20.92 |
| CITIBANK, N.A. | U/KB | 21.20 |
| CARD SME BANK INC A THRIFT BANK | Thrift | 22.76 |
| MICROFINANCE MAXIMUM SB INC | Thrift | 23.20 |
| ANZ BANKING GROUP LTD | U/KB | 23.60 |
| DUMAGUETE CITY DEV BANK INC | Thrift | 23.94 |
| MIZUHO BANK LTD - MANILA BRANCH | U/KB | 24.14 |
| PHILIPPINE BUSINESS BANK INC A SAVINGS | Thrift | 24.24 |
| UCPB SAVINGS BANK | Thrift | 25.06 |
| BDO PRIVATE BANK, INC. | U/KB | 25.82 |
| BANK OF CHINA LIMITED-MANILA BRANCH | U/KB | 25.93 |
| METRO CEBU PUBLIC SAVINGS BANK | Thrift | 26.01 |
| FIRST CONSOLIDATED BANK INC (A PDB) | Thrift | 26.38 |
| DEUTSCHE BANK AG | U/KB | 27.14 |
| KOREA EXCHANGE BANK | U/KB | 27.77 |
| CITIBANK SAVINGS INC | Thrift | 27.89 |
| CTBC BANK (PHILIPPINES) CORP | U/KB | 28.03 |
| BUSINESS AND CONSUMERS BANK (A DB) | Thrift | 28.32 |
| HSBC SAVINGS BANK(PHILS) INC | Thrift | 28.81 |
| LIFE SAVINGS BANK INC | Thrift | 28.86 |
| INTER-ASIA DEVELOPMENT BANK | Thrift | 29.63 |
| CORDILLERA SAVINGS BANK INC | Thrift | 30.48 |
| LEMERY SAVINGS & LOAN BANK, INC. | Thrift | 32.36 |
| THE BNK OF TOKYO-MITSUBISHI UFJ LTD | U/KB | 32.49 |
| UNIVERSITY SAVINGS BANK INC | Thrift | 34.15 |
| PAMPANGA DEVELOPMENT BANK | Thrift | 34.54 |
| MARITIME SAVINGS BANK CORPORATION | Thrift | 35.17 |
| SUN SAVINGS BANK INC | Thrift | 39.74 |
| PHIL TRUST COMPANY | U/KB | 40.06 |
| TONGYANG SAVINGS BANK INC | Thrift | 43.27 |
| MALASIQUI PROGRESSIVE SLB, INC | Thrift | 43.52 |
| TOWER DEVELOPMENT BANK | Thrift | 43.56 |
| QUEEN CITY DEVELOPMENT BANK INC OR QUEENBANK | Thrift | 45.20 |
| DUNGGANON BANK (A MICROFINANCE THRIFT | Thrift | 46.40 |
| MEGA INT'L COMM'L BANK CO LTD | U/KB | 47.34 |
| PACIFIC ACE SAVINGS BANK INC | Thrift | 50.15 |
| SAMPAGUITA SAVINGS BANK INC | Thrift | 50.67 |
| PRIDE STAR DEVELOPMENT BANK INC | Thrift | 50.76 |
| JP MORGAN CHASE BANK NATIONAL ASSN. | U/KB | 55.04 |
| INTERNATIONALE NEDERLANDEN GROEP BK | U/KB | 55.88 |
| BANK OF AMERICA N.A. | U/KB | 56.59 |
| PROGRESS SAVINGS AND LOAN BANK INC | Thrift | 58.08 |
| QUEZON COCONUT BANK INC (A THRIFT BANK) | Thrift | 59.34 |
| BANK ONE SAVINGS AND TRUST CORP. | Thrift | 63.39 |
| OPTIMUM DEVELOPMENT BANK INC | Thrift | 67.80 |
| MERCHANTS SAVINGS & LOAN ASSN INC | Thrift | 71.08 |
| CENTURY SAVINGS BANK CORPORATION | Thrift | 86.48 |
| BANGKOK BANK PUBLIC CO LTD | U/KB | 86.71 |
| AL-AMANAH ISLAMIC INVESTMENT BANK OF THE PHILS | U/KB | 118.77 |
| UNITED OVERSEAS BANK PHILIPPINES | Thrift | 193.83 |
| ISLA BANK(A THRIFT BANK) INC | Thrift | 200.60 |
| BDO ELITE SAVINGS BANK INC | Thrift | 381.89 |
| Philippine Banking System | ||
| Tier One CAR | ||
| March 31, 2014 | ||
| Bank | Type of Bank | Tier One CAR |
| 1ST VALLEY BANK INC A DEVELOPMENT BANK | Thrift | 0.00 |
| BATAAN SAVINGS AND LOAN BANK | Thrift | 0.00 |
| BUSINESS AND CONSUMERS BANK (A DB) | Thrift | 0.00 |
| ENTERPRISE BANK INC (A THRIFT BANK) | Thrift | 0.00 |
| EQUICOM SAVINGS BANK INC | Thrift | 0.00 |
| INTER-ASIA DEVELOPMENT BANK | Thrift | 0.00 |
| MARITIME SAVINGS BANK CORPORATION | Thrift | 0.00 |
| OPTIMUM DEVELOPMENT BANK INC | Thrift | 0.00 |
| THE REAL BANK (A THRIFT BANK) INC | Thrift | 3.04 |
| PLANTERS DEVELOPMENT BANK | Thrift | 4.16 |
| BPI GLOBE BANKO INC A SAVINGS BANK | Thrift | 6.15 |
| PHIL BANK OF COMMUNICATIONS | U/KB | 6.74 |
| THE PALAWAN BANK (PALAWAN DB) INC | Thrift | 7.10 |
| STERLING BANK OF ASIA INC (A SAVINGS | Thrift | 8.03 |
| SECURITY BANK SAVINGS CORPORATION | Thrift | 9.62 |
| LAND BANK OF THE PHILIPPINES | U/KB | 10.11 |
| UNITED COCONUT PLANTERS BANK | U/KB | 10.16 |
| DEVELOPMENT BANK OF THE PHIL | U/KB | 10.24 |
| RIZAL COMM'L BANKING CORP | U/KB | 10.49 |
| METROPOLITAN BANK & TCO | U/KB | 10.69 |
| COMSAVINGS BANK | Thrift | 10.71 |
| UNION BANK OF THE PHILS | U/KB | 10.71 |
| ALLIED SAVINGS BANK | Thrift | 10.76 |
| EAST WEST BANKING CORP | U/KB | 11.31 |
| RCBC SAVINGS BANK INC | Thrift | 11.41 |
| CHINA BANK SAVINGS INC | Thrift | 11.68 |
| STANDARD CHARTERED BANK | U/KB | 12.02 |
| BDO UNIBANK INC | U/KB | 12.34 |
| PHIL POSTAL SAVINGS BANK INC | Thrift | 12.41 |
| WEALTH DEVELOPMENT BANK CORPORATION | Thrift | 12.48 |
| PHIL SAVINGS BANK | Thrift | 12.63 |
| SECURITY BANK CORP | U/KB | 12.66 |
| CHINA BANKING CORP | U/KB | 12.75 |
| PHIL NATIONAL BANK | U/KB | 12.77 |
| BPI FAMILY SAVINGS BANK INC | Thrift | 13.18 |
| WORLD PARTNERS BANK (A THRIFT BANK) | Thrift | 13.18 |
| PENBANK INC (A PDB) (FORMERLY: PENINSULA | Thrift | 13.24 |
| LUZON DEVELOPMENT BANK | Thrift | 13.87 |
| BANK OF THE PHIL ISLANDS | U/KB | 14.22 |
| PHILIPPINE RESOURCES SAVINGS BANKING | Thrift | 14.49 |
| ASIA UNITED BANK CORPORATION | U/KB | 15.58 |
| HONGKONG & SHANGHAI BANKING CORP | U/KB | 16.09 |
| FARMERS SAVINGS & LOAN BANK INC | Thrift | 16.40 |
| HIYAS BANKING CORPORATION | Thrift | 16.40 |
| LEGAZPI SAVINGS BANK INC | Thrift | 16.64 |
| VILLAGE BANK INC (A THRIFT BANK) | Thrift | 17.20 |
| NORTHPOINT DEV'T BANK INC | Thrift | 17.50 |
| BPI DIRECT SAVINGS BANK INC | Thrift | 18.41 |
| PRODUCERS SAVINGS BANK CORPORATION | Thrift | 18.50 |
| MAYBANK PHILIPPINES INC | U/KB | 18.60 |
| MALAYAN BANK SAVINGS AND MORT BANK INC | Thrift | 19.24 |
| BATAAN DEVELOPMENT BANK | Thrift | 19.42 |
| PHILIPPINE VETERANS BANK | U/KB | 19.74 |
| ROBINSONS BANK CORPORATION | U/KB | 20.24 |
| BANK OF COMMERCE | U/KB | 20.33 |
| CITIBANK, N.A. | U/KB | 20.51 |
| ANZ BANKING GROUP LTD | U/KB | 23.13 |
| MIZUHO BANK LTD - MANILA BRANCH | U/KB | 23.20 |
| DUMAGUETE CITY DEV BANK INC | Thrift | 23.54 |
| PHILIPPINE BUSINESS BANK INC A SAVINGS | Thrift | 23.59 |
| UCPB SAVINGS BANK | Thrift | 24.39 |
| BANK OF CHINA LIMITED-MANILA BRANCH | U/KB | 25.35 |
| METRO CEBU PUBLIC SAVINGS BANK | Thrift | 25.37 |
| FIRST CONSOLIDATED BANK INC (A PDB) | Thrift | 25.52 |
| BDO PRIVATE BANK, INC. | U/KB | 25.60 |
| DEUTSCHE BANK AG | U/KB | 26.83 |
| CTBC BANK (PHILIPPINES) CORP | U/KB | 27.20 |
| KOREA EXCHANGE BANK | U/KB | 27.38 |
| CITIBANK SAVINGS INC | Thrift | 27.89 |
| HSBC SAVINGS BANK(PHILS) INC | Thrift | 28.14 |
| LIFE SAVINGS BANK INC | Thrift | 28.63 |
| CORDILLERA SAVINGS BANK INC | Thrift | 29.91 |
| THE BNK OF TOKYO-MITSUBISHI UFJ LTD | U/KB | 31.68 |
| MICROFINANCE MAXIMUM SB INC | Thrift | 35.18 |
| LEMERY SAVINGS & LOAN BANK, INC. | Thrift | 37.10 |
| SUN SAVINGS BANK INC | Thrift | 38.86 |
| PHIL TRUST COMPANY | U/KB | 39.66 |
| TONGYANG SAVINGS BANK INC | Thrift | 43.27 |
| MALASIQUI PROGRESSIVE SLB, INC | Thrift | 43.33 |
| QUEEN CITY DEVELOPMENT BANK INC OR QUEENBANK | Thrift | 44.74 |
| DUNGGANON BANK (A MICROFINANCE THRIFT | Thrift | 46.03 |
| MEGA INT'L COMM'L BANK CO LTD | U/KB | 46.38 |
| PACIFIC ACE SAVINGS BANK INC | Thrift | 50.08 |
| JP MORGAN CHASE BANK NATIONAL ASSN. | U/KB | 54.88 |
| INTERNATIONALE NEDERLANDEN GROEP BK | U/KB | 55.48 |
| SAMPAGUITA SAVINGS BANK INC | Thrift | 55.56 |
| BANK OF AMERICA N.A. | U/KB | 56.39 |
| PROGRESS SAVINGS AND LOAN BANK INC | Thrift | 58.08 |
| QUEZON COCONUT BANK INC (A THRIFT BANK) | Thrift | 58.69 |
| BANK ONE SAVINGS AND TRUST CORP. | Thrift | 63.00 |
| MERCHANTS SAVINGS & LOAN ASSN INC | Thrift | 71.31 |
| PRIDE STAR DEVELOPMENT BANK INC | Thrift | 72.89 |
| OPPORTUNITY KAUSWAGAN BANK INC (A MICROFINANCE | Thrift | 84.74 |
| CENTURY SAVINGS BANK CORPORATION | Thrift | 85.44 |
| BANGKOK BANK PUBLIC CO LTD | U/KB | 85.75 |
| TOWER DEVELOPMENT BANK | Thrift | 107.99 |
| PAMPANGA DEVELOPMENT BANK | Thrift | 117.85 |
| AL-AMANAH ISLAMIC INVESTMENT BANK OF THE PHILS | U/KB | 118.14 |
| UNIVERSITY SAVINGS BANK INC | Thrift | 124.50 |
| UNITED OVERSEAS BANK PHILIPPINES | Thrift | 193.49 |
| ISLA BANK(A THRIFT BANK) INC | Thrift | 200.37 |
| CARD SME BANK INC A THRIFT BANK | Thrift | 280.92 |
| BDO ELITE SAVINGS BANK INC | Thrift | 381.89 |
Source: www.bsp.gov.ph
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