BSP briefs banks on 1.5% countercyclical capital buffer

The Bangko Sentral ng Pilipinas gathered representatives of BSP-supervised financial institutions on June 25, 2026, to discuss a framework designed to help banks withstand economic and financial stress while continuing to serve borrowers.

The BSP said in its July 14 press release that the briefing covered the Countercyclical Capital Buffer, or CCyB, framework established under BSP Circular No. 1235, Series of 2026.

Under the framework, capital equivalent to 1.5% of risk-weighted assets will serve as a buffer that banks may draw down during periods of stress.

The measure is called a “Positive Neutral CCyB” because the buffer is maintained above zero during normal or neutral economic conditions.

The CCyB does not require banks to raise additional capital.

Instead, financial institutions must earmark part of their existing Common Equity Tier 1 capital, the highest-quality form of bank capital used to absorb losses.

For the public, the buffer is intended to reduce the risk that banks will sharply restrict lending during a downturn, which could otherwise make it harder for households and businesses to obtain financing when they need it most.

In an earlier release, the central bank said banks were required to maintain Common Equity Tier 1 capital equal to at least 6% of risk-weighted assets.

With the new framework, 1.5% will be designated as a releasable buffer, leaving a minimum Common Equity Tier 1 requirement of 4.5% of risk-weighted assets.

The BSP said other capital requirements, including the minimum Tier 1 ratio and capital adequacy ratio, will remain unchanged.

The regulation covers universal and commercial banks, their subsidiaries and quasi-banks, as well as digital banks.

Universal and commercial banks, their subsidiaries and quasi-banks will have one year from the rule’s effectivity to comply, while digital banks will have two years.

The Philippine banking system had a Common Equity Tier 1 ratio of 15.06% as of end-December 2025, which the BSP said was well above regulatory requirements.

The CCyB is among the safeguards introduced under Basel III, the global banking reform framework developed following the 2008 financial crisis by regulators working through the Bank for International Settlements.

The Basel Committee published Basel III in December 2010 and designed the CCyB to protect banking systems from risks associated with excessive credit growth. Releasing the buffer during a downturn can help prevent regulatory capital requirements from constraining credit and weakening the wider economy, according to the [Bank for International Settlements](https://www.bis.org/bcbs/ccyb/index.htm).

Assistant Governor Veronica B. Bayangos said, “The framework helps ensure that banks remain resilient and continue supporting households and businesses even during periods of economic or financial stress.”

The BSP’s Office of Systemic Risk Management organized the industry briefing, which explained the framework’s policy rationale, scope and application.

The session also covered the implementation timeline and the framework’s interaction with existing capital requirements.

Officials discussed the indicators that will guide future CCyB assessments and policy recommendations.

The BSP said it will conduct CCyB assessments quarterly, allowing the central bank to determine whether changing financial conditions warrant adjustments to the buffer.

The briefing forms part of the BSP’s continuing engagement with supervised financial institutions as it implements the framework and strengthens the banking system against evolving systemic risks.