Basel III guidelines in the works — Tetangco

The Bangko Sentral ng Pilipinas (BSP) will soon issue the implementing guidelines on higher capital reserves known as the Basel III, the result of a new international agreement designed to prevent another global financial meltdown, central bank chief Amando Tetangco Jr. said Monday. “The BSP will be drafting guidelines, which, of course, would include appropriate traditional arrangements," Tetangco said in a text message to reporters. He bared the central bank’s plan after US authorities adopted more stringent rules on bank capital to curb future excessive risk-taking that led to the financial meltdown whose after effects continue to be felt at present. Tetangco pointed out that the BSP’s response to the new standard could vary. “Raising capital is one response but not the only option," he said. “A better risk infrastructure [would be] to better allocate existing capital resources, perhaps coupled with some internal discussions in the bank on its own adjusted assessment of risks [under the Internal Capital Adequacy Assessment Program or ICAAP, for example]," Tetangco added. With ICAAP, banks are encouraged to think more deeply of their business in terms of assessing the risks they typically encounter in pursuit of business plans. Tetangco had acknowledged that higher capital standard for local banks would lead the financial system out unharmed from the global financial downturn. Credit rating agencies like Standard and Poor’s and Moody’s Investor Service had espoused the same view. “Basle III proposes technical changes that are meant to sharpen our analysis of the ‘new’ risks that may arise, using ‘better’ methods of measuring risks, and introducing ‘different’ means of mitigating risks particularly at the systemic level," Tetangco said. —JE/VS, GMANews.TV