Asian central banks and financial regulators agreed to focus on managing systemic risk to ensure financial stability during this COVID-19 pandemic.
Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno, who co-chaired the Financial Stability Board’s (FCB) Regional Consultative Group for Asia (RCGA), described as “most urgent” central banks’ readiness of managing systemic risks around the region.
Likewise, regulators also discussed the need to ensure adequate liquidity, anticipation of recoveries in 2021, and the timing of exit from expansionary policies.
“No one in this meeting doubts that the financial market will be affected, at some point and in some form,” said Diokno during the RCGA’s bi-annual meeting conducted online.
Diokno said the “pandemic-cum-recession” has forced monetary authorities to develop new perspectives and interventions. “We do not have a ready playbook for addressing the financial market spillovers but we are quite sure that risk aversion abounds and incomes have been lost,” he said.
He also emphasized that more is needed to be done to firmly establish financial stability. “Much more work is ahead of us and I encourage all the participants to keep our communication channels open.
The RCGA is composed of 17 jurisdictions in Asia. The meeting co-chaired by the BSP included other consultative groups for the Americas, Commonwealth of Independent States, Europe, Middle East and North Africa, and Sub-Saharan Africa region.
The COVID-19 outbreak has forced the RCGA to hold its bi-annual meeting through an online platform.
In one of the sessions such as on regional vulnerabilities, Diokno opened discussions by asking if seven months after the pandemic went global, is the region “ready to look ahead?”
Diokno cited the 1997 Asian Financial Crisis and the 2007 Global Financial Crisis and the lessons learned from these events of making sure adequate liquidity in the system is being provided by central banks.
The BSP said RCGA members “had an engaging discussion on the implications of the COVID-19 pandemic, and the steps taken to support sound recovery.” With the recent prognosis of a global recovery in 2021 which is seen to be different for each jurisdiction, the members “weighed the delicate timing of any exit from expansionary policies and other regulatory relief measures,” the BSP added.
RCGA members also tackled ways and opportunities for a “faster, cheaper, more transparent, and more inclusive” exit policies.
Diokno also noted issues on cross- border payment systems that have many challenges in each jurisdiction and that these “need to be addressed before the region can reap its broader benefits for transfers, payments and remittances.”
The FSB, created in April 2009, is an international body that monitors and makes recommendations about the global financial system to ensure international financial stability. “The FSB, working through its members, seeks to strengthen financial systems and increase the stability of international financial markets. The policies developed in the pursuit of this agenda are implemented by jurisdictions and national authorities,” according to its website.