Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona said Wednesday the domestic banking industry remains sound and stable despite some risks that needed to be closely monitored.
“The banking system is in a very good shape, at least the big banks. When you look at the usual regulatory measures, capital, liquidity, these things are well-above [regulatory requirements],” Remolona said in a news briefing at the BSP head office in Manila.
“Although I have to admit that even so, that doesn’t ensure us that there is no systemic risk. There are some risks that we are watching very carefully,” he said.
He cited the recent case of Credit Suisse, the second-largest bank in Switzerland that collapsed in March 2023.
Remolona said Credit Suisse met all regulatory standards but it got into trouble because of global systemic risks. “The lesson is, we need to maintain regulatory standards but at the same time we should always watch out for things that could happen that are not covered by the usual regulatory standards,” he said.
The regulatory standards are based on international standards formulated over many years by the Basel Committee.
Remolona said these standards served the domestic banking industry well.
“That’s why the banking system is in good shape—the system as a whole. There are problem banks. The smaller ones for example, a few rural banks are maybe in trouble. But the big banks seem to be okay,” he said.
The Monetary Board of the BSP closed seven rural banks this year. These were the Rural Bank of Talisay (Cebu) Inc., the United Consumers Rural Bank, Bangko Pangasinan – A Rural Bank, Rural Bank of San Juan (Southern Leyte), Binangonan Rural Bank, Rural Bank of San Marcelino and Rural Bank of San Agustin (Isabela).
Nine rural banks were also closed last year. These were the Rural Bank of Galimuyod (Ilocos Sur) Inc., Rural Bank of Polomolok (South Cotabato), Banco Rural De General Tinio (Nueva Ecija), Farmers Savings and Loan Bank (Bulacan), Metro-Cebu Public Savings Bank, Rural Bank of Mahaplag (Leyte), Rural Bank of Salcedo (Ilocos Sur), Rural Bank of San Lorenzo Ruiz (Siniloan) and Rural Bank of San Nicolas (Pangasinan).
Remolona said BSP was very careful in closing a bank.
“If a bank is in trouble, we put them under something like PCA [prompt corrective action]. PCA is not prompt at all. It takes two years. There’s extensions. There’s temporary restraining orders… It’s done so that the banks are given a chance to somehow recover. But essentially, in the end it’s just [the] lack of capital,” he said.