The Philippine central bank's decision to adopt the net stable funding ratio for universal and commercial banks is credit positive because it will complement liquidity coverage ratio requirements and bolster the banks' funding resilience, Moody's said.
Further, banks' adherence to the NSFR rules, which will take effect Jan. 1, 2019, will limit their reliance on less stable funding sources. The new rules are a key part of the Basel III framework and require banks to maintain more stable funding sources.
The new rules require covered institutions in the Philippines to maintain an NSFR of 100% on both solo and consolidated bases. Moody's said it expects Philippines' 10 largest banks to maintain the required 100% ratio without any challenges.
In its June 4 statement, the central bank noted that small institutions, such as thrift banks, rural banks, cooperative banks and quasi-banks, are subject to the minimum liquidity ratio requirement, which better suits their simpler liquidity risk profile. Further, it will adopt a six-month observation period, starting July 1, to ensure a smooth transition to the implementation of the new rules.
