The Bangko Sentral ng Pilipinas (BSP) is overhauling how banks calculate capital requirements for operational risks, including cyberattacks, fraud and system failures, as it aligns Philippine banking rules with international standards.
Under Circular No. 1241, issued by BSP Governor Eli Remolona Jr., universal, commercial and digital banks, along with their subsidiary banks and quasi-banks, must adopt the Basel III New Standardized Approach (NSA) starting with the end-December 2027 reporting period.
The framework replaces existing calculation methods with a more risk-sensitive approach that considers banks’ income and historical operational losses in determining how much capital they must hold against unexpected losses.
Operational risks include losses arising from failed internal processes, human error, technology breakdowns and external events such as natural disasters.
The Monetary Board approved the guidelines on October 8 under Resolution No. 948.
During a transition period, covered institutions must submit capital adequacy reports using both the existing and new methods, although current rules will remain the basis for assessing compliance with minimum capital requirements.
Banks that demonstrate sufficient readiness may adopt the NSA ahead of schedule, subject to BSP notification and post-verification requirements.
The changes form part of the Basel III reforms aimed at strengthening banks’ resilience to financial and economic shocks.
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