Philippine banks are strong enough to survive extreme levels of risk such as giving up half their loans or having to write them off as losses, the central bank said Thursday.
According to Central Bank Governor Amando M. Tetangco Jr., a so-called stress tests show the 55 universal, commercial and thrift banks are able to absorb extreme values of risks without falling over and having to recapitalize themselves.
Latest data issued by the central bank revealed the adequacy of the banks' capital or CAR averages at 16.48 percent as at end- March this year or more than twice the global average of eight percent.
With the banks' capital adequacy ratio surpassing that mandated by regulation, the banks would still be able to stand their ground even if they were to write off loans as large as 50 percent, Tetangco said.
He attributed the increased capacity of the banks to cope with extreme financial stresses to the early adoption of the Internal Capital Adequacy Assessment Process or ICAAP program in 2008, the height of global difficulties.