D-SIBs remain on solid footing – Diokno – Manila Bulletin
The country’s “too big to fail” banks remain strong and well capitalized as well as liquid with stable funding to support operations in the second year of the COVID-19 pandemic, Bangko Governor Sentral ng Pilipinas assured (BSP) Benjamin E. Diokno.
Diokno only reiterated what he said in January that, in assessing the performance of these large banks during the pandemic – called National Systemically Important Banks (D-SIBs) – D-SIBs remain on “solid foundation” after the BSP has been reviewed to some extent. the full impact of the public health crisis.
“The D-SIBs remain on solid footing in the midst of the health crisis. We see this contributing to the overall strength of the national financial system and the financial stability of the country, ”Diokno said in his weekly“ GBED talks ”online.
Diokno reiterated that the as yet undisclosed D-SIBs are liquid and well capitalized and have the capacity to handle potential losses. “Banks identified as D-SIB are required to have additional Tier 1 basic capital or a higher loss absorption requirement. This aims to ensure that D-SIB’s risk exposures are backed by high quality capital instruments to increase their resilience, ”he said.
D-SIB capital buffers are still well above the regulatory minimum, with a solo capital adequacy ratio of 15.8% at the end of 2020, even higher than 15.3% in 2019 .
Its latest liquidity coverage ratio and stable net funding ratio at the end of February this year were also higher at 192.8% and 142.9%, respectively. These liquidity ratios measure the short- and long-term liquidity of banks and were above what the BSP considers the minimum. This indicates the ability of D-SIBs to manage short and medium term shocks to their liquidity position.
Diokno said the average gross non-performing loan (NPL) ratio of D-SIBs, as expected, rose to 3.3% in the first quarter of 2021, which banks matched with a high NPL coverage ratio. by 99.4%. This increase in the NPL ratio is lower compared to 4.21% for the banking system and 3.73% for industry.
D-SIBs, characterized as banks whose distress or disorderly failure would cause significant disruption to the financial system and the economy at large, recorded asset growth of 6.2% at the end of March. this year, as well as an 8.5% increase in deposits. These numbers compare well with the 5.6% asset growth and 7.8% deposit growth posted by the banking system.
D-SIB loans contracted 3.6% at the end of March, below the 3.9% drop in the banking system’s loan portfolio, Diokno said.
BSP’s D-SIB policy is aligned with the Basel Committee on Banking Supervision which aims to reduce the probability of default of D-SIBs by increasing their loss absorbing capacity and reducing the extent or l ‘impact of the failure of D-SIBs on the national or real economy. .
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