Smaller banks ask for more time to build up buffers for new liquidity rules

By Karl Angelo N. Vidal, Reporter
THE Chamber of Thrift Banks (CTB) urged the Bangko Sentral ng Pilipinas (BSP) to push back the implementation of new liquidity requirements by a year as smaller lenders need more time to build up their capital, a top official said.
In a general membership meeting in Makati City, CTB President Gregorio B. Anonas III said the central bank tapped the industry last Aug. 14 for comments regarding the revised circular on amendments to the liquidity coverage ratio (LCR) for the savings arm of commercial lenders as well as the minimum liquidity ratio (MLR) for standalone thrift banks to be released by end-September.
“At the proposal of CTB, the amendment may include LCR requirement implementation date to Jan. 1, 2020 to build up liquidity position,” Mr. Anonas said in his report.
In an interview, Mr. Anonas explained that the chamber proposed to push back the implementation of LCR as some subsidiary banks have expressed their need for more time to build up their liquidity positions.
“As some of our members are subsidiaries of uni[versal] banks, it came from them also. Why? Because I think they need time to build up (their capital),” Mr. Anonas told BusinessWorld on Friday. “The requirement is very stringent so they really need time to build up to that level.”
The central bank said in February that subsidiary banks will be subject to the LCR, which already applies to their parent institutions. The ratio requires commercial banks and their savings bank arms to hold high-quality, easily convertible assets to cover its projected net cash outflows over a 30-day period.
The banks will undergo an “observation period” wherein their liquid assets will be monitored for the rest of the year, while the new standard will be implemented fully by Jan. 1, 2019.
On the other hand, standalone thrift lenders will be subject to a more straightforward MLR of 20% which will also be implemented at the start of 2019.
“Based on impact studies, BSP believes that covered institutions will be able to readily adjust to the new standard,” the central bank earlier said.
“We (CTB and BSP) were able to come up with a more acceptable formula which doesn’t diminish the liquidity of BSP but also does not put so much of a burden for [standalone banks],” Mr. Anonas added.
The monetary authority wants banks to remain liquid at all times as their inability to service withdrawals or payment transactions could result in “unacceptable costs” that will compromise the financial footing of these lenders.
“We track the liquidity so that if there’s withdrawal, we can fund them. At the same time, we will be able to accommodate loans and investments,” the CTB chief added.