Atty. Jun de Zuñiga The 1973 Constitution directed the then National Assembly to establish a central monetary authority to provide policy direction in the areas of money, banking and credit. The 1987 Constitution mandated a stronger requirement by enjoining Congress to establish an independent central monetary authority. It is clear from the deliberations of the 1987 Constitutional Commission that the independence of the central monetary authority means that it should be free from all undue control and influence, whether it be from local capital interest or foreign interest, or even from the State or the government, particularly from the executive. In accordance with the constitutional mandate, Congress approved House Bill No. 7037 and Senate Bill No. 1235 which were later signed on into law by President Fidel V. Ramos on 14 June 1993 as Republic Act No. 7653, otherwise known as the New Central Bank Act. It took effect on July 3, 1993. This law created the Bangko Sentral ng Pilipinas, a new and separate corporate entity, and it has acted as the central monetary authority of the country, Prior to Republic Act No. 7653, the primary objective of the then Central Bank was to maintain internal and external monetary stability and to preserve the international value of the peso and its convertibility. However, with Republic Act No. 7653, central banking efforts are now driven towards attaining price stability through the framework of inflation-targeting. The reformulated framework explicitly provided for the Bangko Sentral’s fiscal and administrative autonomy and, towards this end, the law requires that the majority of the members of the Monetary Board must come from the private sector. In addition, Monetary Board Members who come from the private sector are required to serve on a full-time basis primarily to avoid conflicts of interest and thereby ensure these Members’ independence. Furthermore, full-time service also gives the Members the benefit of full information, enabling them to carry out their official functions more effectively and efficiently. The Bangko Sentral was also tasked to promote financial stability through bank supervision and regulation. There were enabling provisions for the smooth and orderly functioning of key players in the financial system, adequate protection to depositors, as well as the application of sanctions and stronger remedies for errant banks, their directors and officers. On the other hand, to promote an efficient payment and settlement system, the law laid down the mandate for the Bangko Sentral to provide policy directions in the areas of money, banking and credit. Consequently, the Bangko Sentral has been guided by three (3) pillars of central bank governance, which are: (1) promotion of price stability through responsive and effective monetary policy; (2) promotion of financial stability through banking supervision and regulation; and (3) promotion of en efficient payment and settlement system. A former Central Bank Governor, the late Jose “Jobo” B. Fernandez Jr., said that the framework for central banking necessarily evolved and is dictated by “the felt necessities of the times, the prevalent moral and political theories and the intentions of public policy.” With events caused by modernization and new practices, and with lessons learned from experience, there is a continuing challenge for a central bank to adapt to demands and changes. Consonant therewith and to keep up with these challenges, Congress, as of the present, has favorably considered amendments to Republic Act No. 7653 for a more strengthened and effective central banking in the country. *** The above comments are the personal views of the writer. His email address is [email protected]