The Bangko Sentral ng Pilipinas (BSP) has issued a new regulation allowing Philippine banks to exclude unrealized losses on debt securities from their capital adequacy ratios. The move, reported by Asian Banking & Finance, is intended to prevent paper losses from undermining banks' capital positions amid the current high-interest-rate environment.
Under the new policy, banks may apply for BSP approval to exclude fair value losses on debt instruments classified as fair value through other comprehensive income (FVOCI) when calculating their capital adequacy ratios. The relief is temporary and subject to supervisory review, but it provides flexibility for banks managing investment portfolios affected by rising yields.
Industry observers say the measure aligns with international practices and helps banks maintain lending capacity during volatile market conditions. The BSP emphasized that the exemption does not reduce the recognition of credit losses, which remain subject to existing provisioning rules.