The Bangko Sentral ng Pilipinas (BSP) has allowed domestic banks to exclude unrealized losses, or paper losses, from their capital adequacy ratio (CAR) calculations, according to a report by Asian Banking & Finance.
The regulatory relief, effective immediately, lets banks ignore mark-to-market declines on debt securities held for trading or available for sale. This prevents rising bond yields from artificially eroding capital buffers, allowing lenders to avoid forced asset sales that could exacerbate market stress.
Analysts expect the measure to support bank lending capacity and absorb interest rate volatility. The policy aligns with global practices, as central banks in other Asian markets have similarly adjusted capital rules to maintain financial stability during monetary tightening cycles.