By Lee C. Chipongian
Bangko Sentral ng Pilipinas (BSP) Governor Nestor A. Espenilla Jr. said he remains steadfast in guiding the central bank, the market and the banking sector in what remains a “fundamentally solid and sturdy” economy, and he is prepared on his second year as BSP chief to adopt proactive – and not reactive – regulations.
Nestor A. Espenilla Jr. (Bloomberg)
“We may be going through some strong headwinds today. But we stand undaunted,” Espenilla said on the day the BSP turned 25, last Tuesday.
He reiterated his mantra, that for the BSP to work around its many challenges, they just need to continue with its “careful navigation” and “timely action.”
“(We are) ready to respond where it matters... when it matters,” said Espenilla.
In his first year as governor, Espenilla has done two key things – first the beginning of a gradual phase-down of what he always said was an “ultra-high” reserve requirement ratio (RRR) regime. The BSP has so far reduced RRR twice this year or by two percentage points, in a move he said should “promote the efficiency of monetary policy.” This is after raising policy rates in a row to protect the 2019 inflation path and expectations.
Second, he reorganized the sectors within the BSP in a major way, reshuffling high-ranking officials in changes he said were meant to make the BSP “more agile and resilient” and prepared for anything.
“Amid changes in financial market conditions and increasing sophistication of financial services, we recognized a growing need for financial regulations to adapt, or else risk irrelevance,” said Espenilla.
He also highlighted what has been done in the past year – these are what he called game-changing financial sector reforms primarily to further develop deeper money, debt, and foreign exchange markets and efficient payment systems.
“This is just one of the lessons from going through two episodes of financial crises over the past two decades — financial supervision must be proactive instead of reactive,” said Espenilla. “We have thus shifted to a more comprehensive, risk-based approach to banking supervision. This has significantly improved the safety and soundness of individual banks and promoted early identification and effective mitigation of system-wide financial risks,” he added.