Manila: Universal and commercial banks (U/KBs) are now authorized to set aside funds for lending during periods of financial stress through the Positive Neutral Countercyclical Capital Buffer (PN-CCyB). Under Bangko Sentral ng Pilipinas (BSP) Circular No. 1235, series of 2026, U/KBs, their subsidiaries, and quasi-banks will have one year to comply with the new policy, while digital banks will be granted two years.

According to Philippines News Agency, the BSP announced that unlike minimum capital requirements, which banks must maintain at all times, the PN-CCyB may be built up during periods of strong credit growth and drawn down during times of stress to sustain lending. BSP Governor Eli Remolona Jr. highlighted that the reform aims to bolster the country's financial stability by allowing banks to set aside capital that can be released in challenging times to ensure continuous credit flow to households and firms.

The BSP clarified that the fund will not increase overall capital requirements but will reallocate part of banks' existing Common Equity Tier 1 (CET1) capital into a releasable buffer. Previously, banks were required to maintain CET1 equivalent to at least six percent of risk-weighted assets (RWA).

With the introduction of the PN-CCyB, 1.5 percent of CET1 will be designated as a releasable buffer, leaving a minimum CET1 requirement of 4.5 percent of RWA, consistent with Basel III standards. All other capital requirements, including the minimum Tier 1 ratio and the Capital Adequacy Ratio, remain unchanged. Remolona stated that the Philippines is joining other countries that have established releasable buffers in anticipation of potential crises, enhancing the ability to respond swiftly to shocks without increasing the overall capital burden on banks.