Manila: The Bangko Sentral ng Pilipinas (BSP) has issued a memorandum granting temporary regulatory relief to banks and quasi-banks to help cushion the impact of market volatility caused by the Middle East conflict.

According to Philippines News Agency, the BSP's Memorandum 2026-027 allows banks and quasi-banks to temporarily exclude from the computation of their regulatory capital certain unrealized losses on peso government securities resulting from market volatility. Unrealized losses refer to declines in the market value of securities that have not been sold but whose change in value is required to be reflected in the banks' regulatory capital.

These losses are deducted from Common Equity Tier 1, the highest-quality capital that a bank holds to absorb losses and a key component in computing the Capital Adequacy Ratio. "The time-bound relief is aimed at preventing transitory market movements from unduly affecting the reported capital strength of banks and quasi-banks," the BSP stated.

Banks and quasi-banks availing themselves of the relief must continue to disclose all unrealized losses in financial reports to the BSP and in their financial statements. The temporary relief will be effective from April 1 to Dec. 31 this year, and starting January 2027, the usual capital rules will again apply.