October 06, 2014

BSP reviewing comments on capital hike plan

The Philippine Daily Inquirer yesterday reported that the BSP is reviewing comments from the banking industry regarding its proposal to increase the capital requirements for banks. A draft regulation was reportedly floated to the industry on the proposed hike in minimum capital requirement to P20b (from the current requirement of P4.95b) for universal banks and P10b (from the current requirement of P2.4b) for commercial banks. Similar hikes in capital requirements fare also proposed for thrift and rural banks.

Our take: We believe that the draft regulations are meant to guide industry players about impending regulatory changes, and we view these as among the measures to further spur industry consolidation. We believe that this should be more of a concern for thrift and rural banks which may encounter greater challenges in complying with the requirement. Should they fail to meet the increased capital requirements, most of these small banks might be forced into selling to bigger and more established universal or commercial banks. Hence, the change in regulations may facilitate another wave of mergers and acquisitions in the sector and may result to fewer but stronger banks. – WealthSec