Overstated Capital of Philippine Rural and Cooperative Banks as of December 31, 2018

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, four rural banks have Deferred Charges as of December 31, 2018:

1. Rural Bank of Mabalacat Inc (Deferred Charges of 33.54% of SE)
2. Insular Savers Bank Inc (Deferred Charges of 2.89% of SE)
3. Rural Bank of Mabitac (Laguna) Inc (Deferred Charges of 1.64% of SE)
4. Aspac Rural Bank Inc. (Deferred Charges of 0.03% of SE)
   

Retained Earnings

Only two banks have sufficient Retained Earnings (RE) to absorb their unbooked losses as of December 31, 2018

1. Insular Savers Bank Inc (22.88% of RE)
2. Aspac Rural Bank Inc (0.09% of RE)

The two remaining banks do not have sufficient Retained Earnings (RE) to absorb their unbooked losses as of December 31, 2018

1. Rural Bank of Mabitac (Laguna) Inc (-1.26% of RE)
2. Rural Bank of Mabalacat Inc (-177.86% of RE)