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October 06, 2022

BSP enhances guidelines on computation of capital of government banks

The Bangko Sentral ng Pilipinas (BSP) has further enhanced the guidelines on the computation of the capital of government bank to strengthen their capacity to serve the financing needs of the national government.

The enhancements were contained under Circular 1142 that provides for unsecured peso-denominated credit exposures to the national government to be excluded from the deductible items for purposes of computing the minimum required capital and the Common Equity Tier 1 capital in deriving the risk-based capital adequacy ratio (CAR) of a government bank.

“The policy enhancement will also enable government banks to free up and reallocate capital to aid priority sectors affected by the COVID-19 pandemic, in support of the NG’s broader economic recovery efforts,” BSP Governor Benjamin Diokno said.

For state-run banks, their credit accommodations to the national government are considered directors, officers, stockholders, and their related interests (DOSRI) transactions.

Under existing BSP regulations, these credit accommodations are ordinarily unsecured and deducted from capital.

Circular 1142 aligns these regulations by clarifying that said exposures to the national government are non-risk assets of government banks and should not be charged to their capital.

The issuance, Diokno said, is expected to have a positive impact on the adjusted capital and CAR of government banks, even with their current low loan exposure to the national government.

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