BSP pushes boost to banks’ resilience

The Bangko Sentral ng Pilipinas (BSP) wants local banks to adopt a new approach in calculating the amount of capital they need to set aside to cover operational risks. This, in a bid to strengthen the resilience of the banking sector.

The BSP is collecting comments from stakeholders on a draft circular that would set the guidelines on the local adoption of the New Standardized Approach (NSA) for operational risk.

The NSA is part of the central bank’s efforts to follow international banking standards. Specifically, it wants to follow the Basel III reforms that were developed by the Basel Committee on Banking Supervision in response to the global financial crisis. If adopted, the revised framework will apply to all universal and commercial banks in the country as well as their subsidiary banks and quasi-banks.

Examples of operational risks are losses from fraud, natural disasters, system failures and other internal problems.

The NSA framework is anchored on the premise that such risks tend to be higher for bigger banks with high income.

The new approach is also based on the idea that banks with greater historical operational risk losses are more likely to experience similar losses in the future.

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Thus, the BSP believes that the adoption of the NSA provides a better measure and allocation of capital that will support the banks’ risk-taking activities.

The NSA is intended to replace the Basic Indicator Approach (BIA) and the Standardized Approach for calculating Pillar I operational risk capital (ORC) charges.

A monitoring period would happen from March 2026 until September 2027. This is to enable covered banks to meet the minimum capital ratios.