Philippine central bank approves stiffer capitalization rules for foreign bank branches

The Philippine central bank announced on Monday that it has approved stricter capitalization requirements for foreign bank branches (FBBs) in the country. The central bank asked Philippine branches of foreign banks to comply with the new capitalization rules by 2015. Under the new rules, local offices of foreign banks are now required to put up capital that is permanently assigned for their operations in the Philippines. FBBs have also been allowed to count advances from their parent companies as part of their Tier-1 capital, even though these advances have to be paid back later and should be treated as debt. The central bank said these amendments will align the capital structure of FBBs with the implementation of the Basel III accord and strengthen the capacity of FBBs to absorb risks from their operations in the Philippines. The Philippines will be implementing the Basel III framework in January 2014. This would require FBBs to meet the prescribed minimum capital ratios.