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MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) will now require banks to build extra capital even during periods of normal credit expansion, a move aimed at strengthening lenders’ buffers and ensuring continued lending during economic downturns.
Under Circular No. 1235 dated May 20, the central bank established the framework for implementing the Countercyclical Capital Buffer, or CCyB, and adopted what it calls a “positive neutral rate”.
It is a mechanism designed to ensure banks accumulate additional capital buffers during periods of normal or strong economic conditions, when lending activity tends to accelerate. If financial stress appears — like a recession — the BSP can ease the requirement to free up capital so lending activities can continue.
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