PIA Press Release
Wednesday, January 04, 2012 PHL banks pass 'stress test' -- BSPby Jomie Jean O. Apostol QUEZON CITY, Jan. 4 (PIA) -- Banko Sentral ng Pilipinas Deputy Governor Diwa Guinigundo said on Tuesday that the country’s banks are stable enough to withstand stress tests, translating to a stable economy. “We are in a very good situation,” Guinigundo said on the results of the stress tests on banks. The stability of banks were tested based on various situations such as the system they have in place and their financial position, vis-a-vis hypothetical situations like a hike in interest rate from five to 15 percent. Among the questions the test sought to answer were, "If people who owed the bank were not able to pay (their loans), how will it affect the bank?" Based on these factors, the BSP proved that no bank will fall below the 10 percent capital adequacy ratio which is the Central Bank's requirement, adding that banks are able to absorb the stress scenarios. The agency also has a macroeconomic stress test also called an early warning system derived from the Philippine financial stress index which is based on the ten principal components like the stock market, exchange rate, interest rate and trading which is reported weekly in the monetary board. "Using the financial stress index, in which the key standard deviation is two; meaning, when you reach that point, your economy is unstable," he said, "the agency was able to compute the country's economy rank at negative, meaning it is still stable." Guinigundo added that the standard deviation is a good predictor on what to expect on financial stress. Guinigundo was guest today at the Communication and News Exchange forum at PIA. (JJOA/PIA-GHQ) | 
