BSP grants temporary relief to banks amid market volatility

The Bangko Sentral ng Pilipinas (BSP) has issued a memorandum granting temporary regulatory relief to banks and quasi-banks to cushion the impact of market volatility linked to the Middle East conflict.

Under Memorandum 2026-027, financial institutions may temporarily exclude certain unrealized losses—or “paper losses”—on peso government securities from the computation of their regulatory capital.

Unrealized losses refer to declines in the market value of securities that have not been sold but must still be reflected in banks’ capital. These are normally deducted from Common Equity Tier 1, the highest-quality capital used to absorb losses and a key component in determining the Capital Adequacy Ratio.

“The time-bound relief is aimed at preventing transitory market movements from unduly affecting the reported capital strength of banks and quasi-banks,” the BSP said.

“Banks and quasi-banks availing themselves of the relief must continue to disclose all unrealized losses in financial reports to the BSP and in their financial statements.”

The temporary measure will be in effect from April 1 to December 31, 2026.

The BSP said standard capital rules will resume beginning January 2027.