Overstated Capital of Philippine Banks as of September 30, 2018

Editor's Note: This post has been updated to reflect new information on the BSP website. The number of non-reporting banks has decreased from 21 banks as of January 2, 2019 to just 9 banks as of January 16, 2019.


Editor's Note: According to the BSP website, www.bsp.gov.ph, a record 9 banks do not have Published Statements of Condition for the quarter ended on September 30, 2018. This comprises over 9% of the 100 Philippine Universal and Commercial Banks (U/KBs) and Thrift Banks tracked by this blog. A google search reveals that these non-reporting banks are still operating and there has been no adverse news about them. So why have they gone dark?
 
The number of non-reporting banks has gone up substantially in 2018. As of March 31, 2018, only two banks failed to have their Published Statements of Condition available at the BSP website. On June 30, 2018, that number went up to six. And now that number is now 9 as of September 30, 2018.
 
Have these banks opted-out from the required financial disclosures? It's not clear if they have done so. Apparently, banks can opt-out of mandatory public disclosure.

"Banks that do not want their statement of condition published must get approval from at least five members of the seven-man Monetary Board.² The regulators themselves may also decide to exclude certain kinds of banks from mandatory public disclosure."

Not all of these banks are small banks, some of them are UKBs that are fairly substantial in size. Here's the list:



Let's hope that this is a mere glitch in the BSP website. Perhaps, their financial disclosures were improperly uploaded in the BSP website. Otherwise, the depositors have no means of evaluating the health of their bank other than what is disclosed in the individual bank's website or what is available in back-dated issues of obscure newspapers.

Philippine Banking System
Banks with No Published Statement of Condition
September 30, 2018
Bank	Type of Bank	Published Statement of Condition
ANZ BANKING GROUP LTD	U/KB	NA
BANGKOK BANK PUBLIC CO LTD	U/KB	NA
BATAAN SAVINGS AND LOAN BANK	Thrift Bank	NA
LUZON DEVELOPMENT BANK	Thrift Bank	NA
MALASIQUI PROGRESSIVE SLB, INC	Thrift Bank	NA
MAXIMUM SAVINGS BANK	Thrift Bank	NA
PHILIPPINE VETERANS BANK	U/KB	NA
THE PALAWAN BANK (PALAWAN DB) INC	Thrift Bank	NA
UNITED OVERSEAS BANK LIMITED MANILA BRANCH	U/KB	NA

Overstated Capital

On July 25, 2012, the Bangko Sentral ng Pilipinas (BSP) encouraged banks that continue to reflect unbooked losses or "deferred charges" on their balance sheets to charge those losses against retained earnings.  This implies that the BSP now considers that these banks have amassed so much in Stockholder's Equity (SE) and Retained Earnings (RE) that "they can now afford to absorb higher charges without impairing their capital and also without making their shareholders unhappy."

But can these banks do so? The answer is: yes but only for some banks.  As can be seen from the table below, five banks have Deferred Charges as of September 30, 2018:

1. City Savings Bank (Deferred Charges 4.58% of SE)
2. Bataan Development Bank (Deferred Charges of 0.53% of SE)
3.  Wealth Development Bank Corporation (Deferred Charges of 0.06% of SE)
4. Bank of Commerce (Deferred Charges of 0.02% of SE)
5. Card SME Bank, Inc. (Deferred Charges of 0.00% of SE)

Retained Earnings

Only four banks have sufficient Retained Earnings (RE) to absorb their unbooked losses as of September 30, 2018:

1. City Savings Bank (5.59% of RE)
2. Bataan Development Bank (2.26% of RE)
3. Wealth Development Bank Corporation (1.09% of RE)
4. CARD SME Bank (0.03% of RE)

One of the banks with  Deferred Charges has negative Retained Earnings.  As such, it does not have the capacity to absorb additional losses.

1. Bank of Commerce (Retained Earnings of - Php 421.0 million vs. Deferred Charges of Php 3.34 million)