BSP moves to fortify banks amid global headwinds
The Philippine banking system remained resilient in the first half of the year despite global headwinds, as the central bank moved to reinforce its rules on capital, liquidity, governance and risk management to help lenders withstand shocks and maintain public trust.
In its latest report on the financial system, the Bangko Sentral ng Pilipinas (BSP) said it was finalizing a policy to adopt the Basel III New Standardized Approach (NSA) for operational risk—a crucial step aimed at aligning local capital and prudential standards with global norms.
The new framework is based on the idea that operational risk increases at an increasing rate with the bank’s income, and that financial institutions with heavier past losses are likely to face similar setbacks in the future.
By incorporating both income and average historical loss experience into the capital calculation, the BSP said, the approach would yield a more risk-sensitive and comparable measure of banks’ operational risk capital.
Regulators said the shift would not only improve the allocation of capital for risk-taking activities but also tackle the limitations of earlier methods.
Apart from the adoption of the NSA, parallel efforts to strengthen the financial system also include conducting the National Risk Assessment to find weaknesses in safeguards against dirty money flows, as well as the introduction of clearer guidelines for the disqualification of directors.
Data showed that assets of local banks had increased 7.7 percent year-on-year to P28.2 trillion in June this year, driven by stable domestic deposits.
