Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno is confident that the forthcoming framework for managing systemic risks will ensure a resilient and sustained post-pandemic recovery after taking into account emerging global risks and its impact on local growth.
Diokno, chairperson of the BSP-led Financial Stability Coordination Council (FSCC), also said that in regularly assessing the risks in the global markets, financial regulators are “grounded by the risks that may materialize domestically.”
“This is the nature of systemic risks, thinking globally but always acting locally,” he said on Tuesday, Dec. 7.
The framework for managing crises of systemic risk proportions and the pre-emptive macroprudential stress tests will be announced soon.
The first report on the macroprudential stress test (MaPST) should help financial regulators have a more granular assessment of emerging systemic risks amid the COVID-19 pandemic. Diokno said earlier that the MaPST is an effective pre-emptive test to improve financial stability monitoring.
The FSCC’s 2022 work program, in the meantime, will center on maintaining a resilient financial system which has “avoided the market collapse that was feared early into the pandemic.” The number of private securities issuances in the last two years attested to a liquid market and low financing costs despite the pandemic.
The FSCC has just concluded its year-end meeting which focused on further strengthening the non-bank financial sector. The forthcoming pre-emptive stress test, which is a first of its kind in the country, is a system-wide stress test focusing on non-financial corporations, other firms and industries.
The FSCC, established in 2011, is composed of the BSP, Department of Finance, Insurance Commission, Philippine Deposit Insurance Corp., and the Securities and Exchange Commission.
In July, the FSCC was institutionalized and given legal power through Executive Order (EO) No. 144. Specifically, the powers the EO granted the FSCC include issuing regulations, collaborating with third parties to collect data, streamlining initiatives on financial stability, as well as the authority to coordinate with financial stability authorities in other jurisdictions. The EO also strengthens FSCC’s capacity to provide appropriate analysis that is the basis of any intervention.