The Central Bank of the Philippines has amended its risk-based capital framework to introduce a positive neutral countercyclical capital buffer (CCyB) for universal and commercial banks and digital banks, and to lower the minimum Common Equity Tier 1 ratio to 4.5% from 6% across the banking system. The revised framework keeps the minimum Tier 1 ratio at 7.5% and the total capital adequacy ratio at 10%, and makes the CCyB a releasable CET1 buffer on top of the 2.5% capital conservation buffer. The Monetary Board will set a uniformly applicable positive neutral buffer rate based on macro-financial conditions and systemic risk assessments, with quarterly reviews and a maximum level of 2.5% of risk-weighted assets. The requirement applies on solo and consolidated bases to universal and commercial banks, including branches of foreign banks, as well as their subsidiary banks and quasi-banks, and to digital banks. Any increase in the buffer must be pre-announced 12 months in advance, while reductions take effect immediately. The circular also adjusts distribution restrictions, aligns ICAAP and capital planning rules, updates the domestic systemically important bank framework, and recalibrates prudential real estate exposure limits to the revised CET1 threshold. The 4.5% minimum CET1 ratio will take effect one year after the circular becomes effective and will apply uniformly across banks. The positive neutral CCyB will take effect one year after effectivity for universal and commercial banks, their subsidiary banks and quasi-banks, and two years after effectivity for digital banks. During the transition, real estate exposure limits will continue to be assessed against the current 6% CET1 ratio. The circular itself takes effect 15 calendar days after publication.
Central Bank of the Philippines2026-05-20
Central Bank of the Philippines introduces positive neutral countercyclical capital buffer and lowers minimum CET1 ratio to 4.5%
The Central Bank of the Philippines has amended its risk-based capital framework to introduce a positive neutral countercyclical capital buffer for universal, commercial and digital banks and to lower the minimum Common Equity Tier 1 ratio to 4.5% from 6%, while keeping the minimum Tier 1 ratio at 7.5% and total capital adequacy ratio at 10%. The Monetary Board will set a uniformly applicable buffer rate of up to 2.5% of risk-weighted assets, with quarterly reviews, and the circular also adjusts distribution restrictions, aligns Internal Capital Adequacy Assessment Process and capital planning rules, updates the domestic systemically important bank framework, and recalibrates prudential real estate exposure limits.