BSP approves releasable capital buffer to keep lending in downturns

The PN-CCyB designates 1.5% of banks’ CET1 as a releasable buffer.

The Philippine central bank has approved a reform enabling local banks to maintain releasable capital to keep credit flowing to households and firms.

The Positive Neutral Countercyclical Capital Buffer can be built up during periods of strong credit growth and drawn down in times of stress to sustain lending, according to the Bangko Sentral ng Pilipinas (BSP).

“The reform will strengthen the country’s financial stability as it enables banks to set aside capital that can be released in bad times to keep credit flowing to households and firms,” said BSP Governor Eli Remolona, Jr.

Under current rules, banks must maintain CET1 of at least 6% of risk-weighted assets (RWA).

With the PN-CCyB, 1.5% of CET1 will be designated as a releasable buffer, leaving a minimum CET1 requirement of 4.5% of RWA. This is consistent with Basel III standards that aim to make banks more resilient, BSP said.