Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno has initiated what he called an “open and informal discussion” with Asian countries to assess the “evolving" financial stability issues in the region after more than a year of the pandemic.
Diokno assembled the informal meeting this week as co-chair of the Financial Stability Board (FSB)-Regional Consultative Group for Asia (RCGA). The RCGA, one of FSB’s six consultative groups, have 17 jurisdictions and includes the Philippines, Brunei Darussalam, Cambodia, Malaysia, New Zealand, Pakistan, Sri Lanka, Thailand, Vietnam. The Reserve Bank of India is also co-chair of the RCGA.
The meeting that Diokno convened was for non-FSB members of the RCGA.
“The emerging story is that COVID is causing divergence within markets and across jurisdictions,” he said, adding that “it should be incumbent upon us to get a good feel of how our different members are in their own COVID-recovery journey.”
Diokno said they discussed the “scars” of COVID-19 pandemic on corporate
viability and debt servicing. They also talked about market support for “possible unintended longer-term risks from these support measures.”
He also emphasized the importance of communicating systemic risks under the financial stability agenda. “If there is one word that aptly describes our discussions, it is ‘balance’. There is that balance sought between the needs of today versus tomorrow, between support versus viability, and between instilling transparency versus avoiding undue concern”, said Diokno.
Citing the Philippines’ own Financial Stability Coordination Council (FSCC), the BSP chief stressed on an effective communication of risks which should “start when markets are calm, rather than when these risks have materialized,” he said.
“It is essential to regularly engage the members of the RCGA. COVID has forced us to adjust but we will happily do so because a state of stability by managing systemic risks is our shared objective,” said Diokno.
Last November, Asian central banks and financial regulators also had a discussion on managing systemic risks in the region.
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.
Through the FSCC, the BSP regularly have financial stability dialogues with different agencies of government, and comes up with a quarterly Financial Stability Report.