Asset-Capital Relationships in Philippine Commercial and Savings Bank

  • Errol B. Perez U.P. Ceasar EA Virata School of Business
  • Jose S. Victoria U.P. Ceasar EA Virata School of Business


This study looks into the management of bank risks through adequacy of capital.  It validates the use of bank assets as a predictor of equity through the use of a simple linear regression model.  A comparison of savings banks and commercial banks was made.  Regression models were used in the analysis, relating equity capital to assets.  Although a significant linear relationship is obtained for both types of institutions, the degree of fit as shown in the coefficient of determination appears low for commercial banks (66 percent) compared to savings banks (94 percent).

 There is a substantial implication as to the adequacy of capital among commercial banks as opposed to savings banks.  Savings banks maintain a better relationship of capital backup vis-avis assets.  This apparently emanates from essentially more conservative asset acquisition policies by savings banks.  Commercial banks, on the other hand, may portray a greater degree of risk to depositors due to greater variation in the amount of bank assets relative to capital.