BSP eases capital rules amid market volatility

The Bangko Sentral ng Pilipinas (BSP) has granted temporary regulatory relief to banks and quasi-banks to help cushion the impact of financial market volatility triggered by the ongoing conflict in the Middle East.

Under BSP Memorandum No. 2026-027, banks and quasi-banks may temporarily exclude certain unrealized losses, or paper losses, on peso-denominated government securities from the computation of their regulatory capital.

Short-term market fluctuations

The measure is intended to prevent short-term market fluctuations from unduly affecting the reported capital positions of financial institutions.

The BSP said the relief will be available from 1 April to 31 December 2026. Beginning January 2027, the standard capital treatment will again apply.

The BSP clarified that institutions availing themselves of the relief must continue to disclose all unrealized losses in their regulatory reports and financial statements.

Unrealized losses arise when the market value of securities declines but the assets have not been sold.

Under normal rules, these losses reduce Common Equity Tier 1 (CET1) capital — the highest-quality capital used to absorb losses and a key component of a bank’s capital adequacy ratio.

Part of a broader package

The latest measure forms part of a broader package of temporary relief initiatives rolled out by the BSP since the onset of the energy crisis linked to geopolitical tensions in the Middle East.

Earlier this year, the central bank introduced a range of liquidity and prudential measures aimed at helping banks support households and businesses affected by higher fuel prices, inflationary pressures and tighter financial conditions.

Banking system fundamentally sound

The BSP has maintained that the Philippine banking system remains fundamentally sound, with strong capital buffers, ample liquidity, and healthy asset quality.

However, it has also warned that global risks —including elevated energy prices, geopolitical tensions and financial market volatility — continue to warrant close monitoring.

The central bank said the temporary capital relief is designed to support financial stability while ensuring that banks remain capable of extending credit and supporting economic activity during a period of heightened uncertainty.