Banks told to beef up funds for lending

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May 23, 2026 | 12:00am

During bad times

MANILA, Philippines — Banks are now required to set aside capital that can be tapped to support lending during periods of stress – a reform approved by the Bangko Sentral ng Pilipinas (BSP) amid heightened global risks and uncertainties arising from the US-Iran conflict.

In a statement, the BSP said the measure enables banks to maintain releasable capital, known as the Positive Neutral Countercyclical Capital Buffer (PN-CCyB).

The new regulation applies to universal and commercial banks, their subsidiaries and quasi-banks, as well as digital banks. 

Unlike minimum capital requirements, which banks must maintain at all times, the PN-CCyB can be built up during periods of strong credit growth and be tapped in times of stress to sustain lending.

“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,” BSP Governor Eli Remolona Jr. said.

The central bank clarified that the PN-CCyB is unlikely to increase overall capital requirements.

Instead, it rechannels part of banks’ existing common equity tier 1 (CET1) –  the high-quality capital they maintain as a cushion against risks –  into a releasable buffer.

 Currently, banks must hold CET1 equivalent to at least six percent of risk-weighted assets (RWA).

 With the new rule, 1.5 percent of CET1 will be designated as a releasable buffer, leaving a minimum CET1 requirement of 4.5 percent of RWA, aligned with Basel III standards that aim to make banks more resilient.

“All other capital requirements, including the minimum Tier 1 ratio and the capital adequacy ratio remain unchanged,” the BSP said.

The regulator said the initiative is “timely” amid heightened global risks and uncertainties stemming from the Middle East conflict.

 The Philippines joins countries that have built releasable buffers ahead of

potential crises. This enhances our ability to respond swiftly to shocks without increasing the overall capital burden on banks,” Remolona said.

 The country’s banking system remains well positioned to adopt the measure, with a CET1 ratio of 15.06 percent as of end-December 2025, well above regulatory requirements.

Additionally, the BSP said the new rule under Circular 1235, Series of 2026, will be implemented in phases.

Universal and commercial banks, their subsidiaries and quasi-banks are given a one-year grace period from effectivity to comply, while digital banks are given two years.