Implications of Basel III on the return of assets and return on equity of Universal Banks in the Philippines in relation to the upcoming ASEAN Integration / Germino, Princess Gracia V., Adan, Maria Francesca M., Banaag, Alexandra Isabel A., Catbagan, Sol Marie Ann S., Dela Cruz, Dominique Lyn A., Juruena, Jessica Lindsay P., Navasca, Mary Antonette R., Reformina, Ivan kim S., Sangle, Marjorie M., Villa, John Maverick E. 6

Research Paper: (BSBA major in Finance and Treasury Management) - Pamantasan ng Lungsod ng Maynila, 2016. 56

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ABSTRACT: This study aims to address the relationship of the Risk-Based Capital Adequacy Framework under Basel III and the profitability as measured by return on assets and return on equity of Universal Banks in the Philippines in relation to the upcoming ASEAN Integration. The researchers conducted the study among the fourteen (14) domestic Universal Banks in the Philippines. Basel III is a new capital adequacy framework, wherein the regulatory capital structure is simplified, and the quality of regulatory capital is improved and humonized. The study considered capital adequacy as a variable which affects bank performance. Capital adequacy measures the bank's capital and its financial strength and stability. It is shown in the study that capital adequacy have an insignificant effect on the profitability of banks, in terms of ROA and ROE. Based on the data gathered, banks can fully comply with the capitalization requirements of Basel III, yet wouldn't help to enhance their profitability. The study also determines the correlation of ROA and ROE to total CAR, Tier 1 ratio and CET 1 ratio. The study found that there is no correlation, which means the compliance of the (14) Universal Banks in the Philippines to the BASEL III requirements on CAR, Tier 1, and CET 1 does not contribute changes to ROA and ROE, either positive or negative. In addition, it is specified that the Universal Banks in the Philippines believe that they are ready to compete with the banks of other ASEAN countries that may enter the Philippines in the ASEAN economic integration, yet it is expected that there will be an intense competition among universal banks.

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