Bankers polled by Business Bulletin aired that the issuance of the guidelines will allow bank management to finalize plans to tap, either the onshore or offshore, markets to raise funds to beef up the capital base, which could be dented following its compliant to international accounting standard (IAS).
"The issuance of the rules on hybrid Tier 1 float will open the floodgates for banks and other institutions to raise capital under this route," commented an industry source, who asked not be named.
The source explained that most banks are now doing the necessary pencil pushing to come up with a program befitting its institution with the IAS compliance.
This internationally accepted accounting convention plus the compliance to Basle 2 could impair the financial position of banks, unless, capital increase comes in the form of fresh equity infusion.
A highly-placed source, meanwhile, said the issuance of the guidelines was "very timely for DBP (Development Bank of the Philippines) because we are set to do presentation this Wednesday, December 14."
DBP will now reverse its plan of first issuing the Tier 2 capital notes instead of its revised plan to float Tier 1 capital notes. "The bank will go back to its original plan to issue Tier 1 before Tier 2 to maximize the amount allowed under by the regulators."
The Bangko Sentral ng Pilipinas (BSP) allows banks to float debt instruments, qualified as Tier 2 capital, of up to 50 percent of Tier 1. On the other hand, BSP, under its guidelines release before the week ended allowed banks to issue instruments of up to 15 percent of its Tier 1.
To recall, DBP President Reynaldo S. David has said, in no uncertain terms, that the bank could only finalize the terms of both its hybrid Tier 1 and Tier 2 capital once the authorities issue the rules and regulations, particularly, on hybrid.
Metrobank, the country’s top commercial bank, is, also, set to issue some $125 million worth of Hybrid Tier 1 capital to strengthen its capital base this coming year. Among the features of the securities, include its being noncallable for 10 years, while coupon payments shall be deferrable and non-cumulative.
Already, the authorities have given the green light for Metrobank to undertake this activity. This despite the fact that Metrobank has complied with the IAS and International Financial Reporting Standards (IFRS) for its financial reporting since last year yet.
"The issue will help strengthen our capital in light of the global shift into International Accounting Standards (IAS). This will also better position the bank to take advantage of any opportunities that may arise," said Metrobank President Antonio S. Abacan, Jr.
The IAS and the (IFRS) set strict rules on how transactions and other events are reflected in financial statements. The standards are applied to banking institutions worldwide.
