A study on the potential impact of the Basel III capital adequacy framework to the financial performance of the top 8 local banks in the Philippines as of 2013 (Q3)

• Main Authors: Bayna, Patricia Ann T., Dionisio, Jennilyn Y., Morasa, Jan Eidref V., Tuzon, Gheramie Kaye J.
• Format: text
• Language: English
• Published: Animo Repository 2014
• Subjects: Universal banks > Philippines; Banks and banking > Philippines
• Online Access: https://animorepository.dlsu.edu.ph/etd_bachelors/8570
• Institution: De La Salle University

This study aims to prove that the new regulatory requirement, Basel III capital adequacy framework, has a potential impact to the financial performance of the top eight (3) universal and commercial banks (U/KBs) in the Philippines as of third quarter of 2013, namely Banco de Oro Unibank, Inc. (BDO), Metro Bank & Trust Co. (MBT), Bank of the Philippine Islands (BPI), Land Bank of the Philippines (LBP), Development Bank of the Philippines (DBP), China Banking Corporation (CBC), Rizal Commercial Banking Corporation (RCBC), and Union Bank of the Philippines (UBP). The banks' financial performance is defined through the measure of ROE and ROA. This will be determined through the use of the statistical software package STATA in performing panel regression. Based on the assumption that Basel III was already implemented during the year 2007 to 2012, the computed Basel III CAR based on the modified formula was regressed with the computed profitability ratios: ROE and ROA. The researchers found out that if Basel III capital adequacy framework was already implemented from 2007 to 2012, there exists a positive potential impact to the financial performance of the banks. This was attributed to the (1) strong partnership between the Bangko Sentral ng Pilipinas (BSP) and universal and commercial banks in the Philippines (U/KBs) (2) depositor's high level of confidence (3) focus on lending activities and, (4) building up of a capital through retained earnings. This was verified through the forecasting of the financial statements of a sample of at least two banks included in the scope of the research. The forecast holds for the year 2013 to 2014.