The Bangko Sentral ng Pilipinas (BSP) has approved a new rule allowing banks to build up a special capital buffer that can be used during periods of economic stress to help sustain lending to businesses and households.
New Countercyclical Capital Buffer
Under the reform, banks can maintain a "Positive Neutral Countercyclical Capital Buffer," which serves as releasable capital during crises. The measure applies to universal and commercial banks, their subsidiaries and quasi-banks, as well as digital banks.
In a statement, BSP Gov. Eli M. Remolona Jr. said the reform would strengthen the country's financial system by enabling banks to set aside capital during periods of strong credit growth and release it when economic conditions weaken.
"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," Remolona said.
Impact on Capital Requirements
The BSP clarified that the reform does not increase overall capital requirements for banks. Instead, part of the banks' existing Common Equity Tier 1 (CET1) capital — considered the highest-quality capital buffer — will be reallocated into a releasable reserve.
Currently, banks are required to maintain CET1 equivalent to at least six percent of risk-weighted assets. Under the new framework, 1.5 percent of that capital will be designated as releasable buffer capital, leaving a minimum CET1 requirement of 4.5 percent, in line with global Basel III standards.
Other capital requirements, including the minimum Tier 1 ratio and capital adequacy ratio, will remain unchanged.
Context and Implementation
The BSP said the measure comes at a time of heightened global uncertainty due to geopolitical tensions. As of end-December 2025, the Philippine banking system's CET1 ratio stood at 15.06 percent, well above regulatory minimums.
Remolona said the Philippines is joining other countries that have established releasable capital buffers ahead of potential financial shocks to improve crisis response without adding to banks' capital burden.
The new rule, issued under BSP Circular 1235, Series of 2026, will be implemented in phases. Universal and commercial banks, including subsidiaries and quasi-banks, will have one year to comply, while digital banks will be given two years.
