BSP Approves Standards for Bank Risk Management

Article excerpt


The Monetary Board, the policy making body of the Bangko Sentral ng Pilipinas (BSP), has approved a set of qualitative and quantitative standards designed to improve the market risk management of banks.

Also approved was the amended guidelines on the computation on the lowering of the capital adequacy requirements under the risk-based framework recommended by the Basel Committee.

According to BSP Governor Rafael Carlos B. Buenaventura, the issuance of the market risk management standards and the capital adequacy are part of the series of prudent measures the monetary authorities want to institute to protect the banks' balance sheet from any possible further erosion.

As approved, banks can assign lower risk weight depending on the issuer and the type of collateral backing-up the securities or debt instruments.

In particular, a zero risk weight will be assigned on securities issued by multilateral development banks (MDBs) such as the Asian Development Bank (ADB) from the previous 20 percent.

"MDBs were assigned a zero percent risk weight since they are normally triple A rate entities," Buenaventura explained.

The new risk weight ruling also include the expanded list of qualified MDBs. …