Philippine banks registered an average capital adequacy ratio (CAR) of 16.65 percent in 2011, better than the 16.02 percent the previous year, the Bangko Sentral ng Pilipinas reported Thursday. 

 

According to the central bank, the improvement in the CAR was an indication that banks in the Philippines have the ability to withstand shocks, such as an adverse impact of the ongoing crisis in the Euro zone. 

 

“The Philippine banking system remains resilient,” the BSP said in their report.

 

The CAR as of end-2011 was also an improvement from the 16.44 percent recorded as of end-September 2011, the BSP also said. 

 

CAR, one of the key indicators of a bank’s health, is the proportion of their capital to their risk-weighted assets. A rising CAR indicates improving capability to absorb risks, such as increased default by borrowers. 

 

Under BSP rules, banks in the country must maintain a CAR of at least 10 percent. Under international standards, CAR must be at least 8 percent. 

 

The BSP said all banking sub-sectors in the country registered CARs above the minimum requirements observed both in the Philippines and internationally. 

 

Average CAR stood at 16.66 percent for universal and commercial banks, 15.86 percent for thrift banks, 18.44 for rural banks, and 15.73 percent for cooperative banks. — DVM, GMA News