The Bangko Sentral ng Pilipinas (BSP) has approved a new capital buffer framework that will allow banks to set aside funds during stronger economic periods and release them during times of financial stress to keep credit flowing.
The BSP said the Positive Neutral Countercyclical Capital Buffer, or PN-CCyB, is a major reform aimed at strengthening the resilience of the Philippine banking system without raising overall capital requirements.
The new rule applies to universal and commercial banks, their subsidiaries, quasi-banks and digital banks.
Unlike fixed minimum capital requirements, the PN-CCyB is designed to be built up during periods of economic expansion and drawn down during downturns or financial shocks. This allows banks to continue lending to households and businesses even during difficult conditions.
“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,” BSP Governor Eli Remolona Jr. said.
The BSP said the measure does not add to the banking sector’s total capital burden. Instead, it reallocates part of banks’ existing Common Equity Tier 1, or CET1, into a releasable buffer.
Under current rules, banks must maintain CET1 equivalent to at least six percent of risk-weighted assets. With the PN-CCyB, 1.5 percent of CET1 will be designated as a releasable buffer, leaving the minimum CET1 requirement at 4.5 percent of risk-weighted assets. The BSP said this remains consistent with Basel III standards.
Other capital requirements, including the minimum Tier 1 ratio and the capital adequacy ratio, will remain unchanged.
The BSP said the reform comes at a critical time as global risks and uncertainties persist due to geopolitical tensions. It noted that the Philippine banking system is well-positioned to adopt the measure, with the sector’s CET1 ratio at 15.06 percent as of end-December 2025, well above regulatory requirements.
“The Philippines joins countries that have built releasable buffers ahead of potential crises. This enhances our ability to respond swiftly to shocks without increasing the overall capital burden on banks,” Remolona said.
The new regulation is contained in BSP Circular No. 1235, Series of 2026.
Universal and commercial banks, their subsidiaries and quasi-banks will be given one year from the circular’s effectivity to comply, while digital banks will have two years to meet the requirement.