A comparative study on the relationship of capital to assets, net income, loans, deposits, ROE and ROA of private domestic expanded commercial banks and private domestic commercial banks using multiple regression analysis, 1993-1997

• Main Authors: Guzman, Michael, Ong, Margaret Go, Romero, Kristina, Yap, Hubert T.
• Format: text
• Language: English
• Published: Animo Repository 1999
• Online Access: https://animorepository.dlsu.edu.ph/etd_bachelors/16581
• Institution: De La Salle University

Capital shall refer to the total of the unimpaired paid-in capital (including paid in surplus) earned surplus and undivided profits, net of unbooked valuation reserves and other capital adjustments as may be required by BSP and total outstanding unsecured credit accommodations to Directors, Officers, Stockholders and Related Interests (DOSRI). Capital has different functions. First, capital provides a cushion against the risk of ongoing crisis and operating losses. Second, capital provides the funds needed to get the bank started before deposits come flowing in. Third, capital promotes public confidence in a bank and reassures its creditors of the bank's financial strength. Finally, capital serves as a regulator of bank growth. Minimum capital requirement is not new to the banking system. It started in 1972, with P 100 million for commercial banks. When unibanking concepts was introduced in 1980, there was a minimum capital requirement of P 500 million. A lot of changes follow until recently, BSP directed another round of increase in capital requirement. Bank capital has increased through the years due to the capital requirement imposed by Central Bank of the Philippines and new Bangko Sentral ng Pilipinas. This causes changes in the capital account of banks. In relation to these changes, the researchers made this study on the relationship of capital to a commercial bank's assets, net income, loans, deposits, return on equity and return on assets Comparative and descriptive approaches were used in this research. Data were gathered from different libraries and these are mainly secondary data. Statistical tools were also used to determine the relationship of capital to other independent variables. Regression analysis, multiple regression, covariance of regression, correlation, analysis of variance, Durbin-Watson test, Step-wise regression, t-statistic and F-statistic were used. The study included only private domestic universal and private domestic commercial banks from the period 1993 to 1997. Private domestic banks consist of 16 banks while there are 7 private domestic commercial banks. Both types of banks should be at least 5 years in operation either as a universal bank or a commercial bank. The results show that there is a significant relationship between a bank's capital to its assets, net income and deposits. Examples were cited to identify the significant relationships. There is also a significant difference between an ordinary commercial bank to a private domestic universal bank.