Speaking Out
By Ignacio R. Bunye
“The banking system remains healthy, characterized by strong balance sheets, profitable operations, and sound performance indicators.”
With this positive outlook on the Philippine banking system, Monetary Board Chairman and Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona, Jr. led the ceremonial toast of the annual reception for the banking community hosted by the BSP at the historic Fort San Antonio Abad in Manila on Jan. 26, 2024.
Former central bank governors Jose L. Cuisia, Jr., Amando M. Tetangco, Jr. and Benjamin E. Diokno (who has rejoined the BSP as the 7th member of the Monetary Board), the other Members of the Monetary Board (MBM) Bruce J. Tolentino, Anita Linda R. Aquino, Rosalia V. de Leon, Romeo L. Bernardo, and Finance Secretary Ralph G. Recto, as well as luminaries of the banking and diplomatic community attended the event.
In his speech, Governor Remolona said the banking system had stood firm and proved its true resilience through the pandemic and the international disruptions of March 2023.
“Through all these years, the BSP has managed to be a source of stability for the economy,” the Governor said.
He however stressed that the BSP would not rest on its accomplishments: “We deeply feel that we still have work to do.”
The Governor then proceeded to outline what he called as an “ambitious” reform agenda, which he said entailed the support of all present.
“First, we want to further enhance our monetary policy framework by sharpening our research, our model, and non-monetary tools. We want these to be more responsive to inflation pressures, particularly during periods of unusual and large supply shocks,” he said.
The Governor explained that so far, the BSP had managed to anchor inflation expectations and thus effectively control second-round effects.
Through its inflation-targeting framework, headline inflation has gone down to 3.9 percent as of December 2023, from a high of 8.7 percent in January 2023.
“Second, we will strengthen the way we conduct systemic risk oversight. You saw what happened in March 2023 with Silicon Valley Bank and Credit Suisse. We don’t want this to happen to us,” the Governor emphasized.
Governor Remolona then mentioned deepening capital markets as the agenda’s third goal, as part of the responsibility of the BSP financial stability mandates.
“This is meant to diversify the sources of funds in our financial system so that our businesses and our investments do not have to rely entirely on the banking system in case there is a credit crunch,” he explained.
Fourth, the BSP will strive to make its sustainability initiative more meaningful by infusing it with an inclusion perspective.
“We want to ensure that the entire financial system supports an inclusive adaptation program so that the burden of transmission does not fall on the most vulnerable segments of our society,” Governor Remolona explained.
Parallel to this, the BSP is harnessing digital technology to empower sectors which have been traditionally underbanked.
“We think our open financial framework will unlock opportunities for consumers,” Governor Remolona said.
He added, “The BSP has been relentless in bringing our Paleng-QR Ph Plus Program to various parts of the country, giving market vendors, public transport drivers, and other merchants a more convenient way of accepting e-payments for their transactions.”
Coincidentally, the BSP Governor said this year’s annual reception for the banking community was a very special one as it marked 75 years of central banking in the country.
Governor Remolona thanked the forward-thinking leaders who understood the necessity for BSP to adapt to evolving times, and the tireless dedication of BSP’s talented individuals who played a pivotal role in achieving this milestone.
He recalled that the BSP had started as a central monetary authority in 1949, later assuming the responsibility for regulating the financial system. In 2019, the BSP inscribed in its charter its three fundamental mandates: maintaining price stability; financial stability; and a safe and efficient payments and settlement system.
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