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Philippines central bank revises framework for D-SIBs

Bangko Sentral ng Pilipinas on Oct. 14 said it approved changes to its framework for domestic systemically important banks, or D-SIBs.

The central bank made revisions in the differential weights of categories/indicators and the composition of indicators, including the adoption of threshold level, and calibration of the level of additional capital requirement for D-SIBs in the country.

Under the revised framework, a bank's systemic importance will be assessed according to size, interconnectedness, substitutability and complexity, the central bank said. The first two indicators now have a greater weight since they are more critical measures that determine a bank's systemic importance to the financial system in the Philippines, it added.

Once identified, D-SIBs will be categorized into different higher loss absorbency, or HLA, buckets and will be required to increase their minimum common equity tier 1 capital by 1.5% to 2.5% of total risk-weighted assets. Banks that fall under bucket 1 will have a 1.5% HLA requirement, while those under bucket 2 will have a differentiated HLA requirement of up to a maximum of 2.0%.

The central bank said it will maintain an empty bucket 3 with HLA requirement of 2.5% to provide incentives for banks to avoid becoming more systemically important.

The revisions will apply to all universal and commercial banks, their subsidiaries and quasi-banks, and all branches of foreign banks under a consolidated basis.