The ability of banks in the Philippines to pay dividends to their stockholders will become restricted on January 1, 2014, when the Basel III capital requirements become fully implemented.
Earlier in the week, the nation's interpretation of the capital rules for universal and commercial banks was approved by the Monetary Board, according to Malaya Business Insight.
Now that new capital requirements have been established, the lending institutions that cannot meet them will not be able to pay dividends, BSP Deputy Governor Nestor Espenilla told the news source. He added that lending institutions that have a common equity tier 1 (CET1) ratio between 6 and 7.25 percent will not have the ability to make dividend payments.
If a lending institution has a CET1 ratio between 7.25 percent and 8.5 percent, it will be permitted pay out 50 percent of its earnings as dividends. Banks with a CET1 ratio above 8.5 percent will be allowed to pay out 100 percent of earnings as dividends.
In addition to implementing these restrictions on dividend payments, the BSP has provided banks in the Philippines with a Basel III adoption timeline far more advanced than many developed economies.
◦ Asset Liability Management
◦ Portfolio Risk
◦ Sensitivities & Hedging
◦ Stress Testing & Scenario Analysis