The Philippine banking system is among the most stable, sound and well-managed all over the 10-nation Southeast Asian countries, according to the Asian Development Bank (ADB).
This was assured by the Bangko Sentral ng Pilipinas (BSP) while showing a newly released document from the ADB issued in July 2012.
The document said  Philippine banks, mostly universal and commercial banks (UKBs), are in rock-solid ground because of good financial managers and presence of good risk management system.
As of June 30, 2012, there are 19 universal and 19 commercial banks operating in the Philippines.
BSP deputy governor for supervision and examination sector Nestor Espenilla said the statement of ADB can be considered a “slap in the face of naysayers who doubt the condition of Philippine banking system.”
The official called the false rumors about the lousy condition of the banking system as “totally baseless.”
“I think they should be very careful about their thinking. They can do a lot of damage unwittingly,” Espenilla said.
“Based on ADB, the Philippines’ average non-performing loan (NPL) ratio of 2.2 percent is lower than the Asean 5 average of 2.3 percent. If they still don’t believe the ADB, that’s a different story already,” Espenilla told The Daily Tribune.
Asean 5 is composed of the Philippines, Indonesia, Malaysia, Thailand and Singapore. Other Southeast Asian nations Vietnam, Cambodia, Brunei, Laos and Myanmar are not listed because of unliberalized policies imposed on their banking system.
NPL is the banks’ unsettled loans from clients. If a bank has many uncollected payments for loan, it suggests that the bank has lousy collection system.
A big NPL ratio can lead banks to window dress to make its financial statement appear unproblematic.
The BSP mandates that the lower NPL, the better for any bank.
Another indication if a bank is in healthy cash position is the good capital adequacy ratio (CAR).
BSP’s allowable CAR requirement is 10 percent (existing) and 12.5 percent (prospective).
If both levels are met, the bank has close or higher than Philippine industry actual level of 16 to 17 percent.
Espenilla said even at the CAR department mandated by ADB, Philippine banks are among the most sound.
“In terms of CAR, our 17.4 percent is higher than the Asean 5 average of 16.3 percent,” Espenilla said.