The Bangko Sentral ng Pilipinas (BSP) has started its regular Systemic Risk Review (SRR) as part of enhancements to its overall systemic risk surveillance and analysis.
In a report, the BSP said it has been conducting SRR for the Financial Stability Coordinating Council (FSCC) as a “reference in crafting recommended courses of action.”
The SRR included new studies, enhanced methods, and “refined analytics that improved systemic risk analysis, identification of contagion channels, and assessment of conglomerate risks in the financial system.”
The BSP also noted that the SRR covered key analyses and relevant notes related to the pension system, the payments network, and the risk price benchmark.
Meanwhile in 2023, the BSP conducted the second phase of the Macroprudential Stress Test. This is a test that captured new sets of data and improved methodology to detect vulnerabilities that affect credit risk in the financial system by analyzing leverage, liquidity, contagion, and concentration risks under different macroeconomic scenarios, it explained.
The BSP has been improving its systemic risk management models, metrics, and policies.
Last year, the central bank improved the measurement of firm-level health conditions or the scope of monitoring firm-level risks with a new technique for analyzing liquidity-seeking firms.
“This method involved assessing firm-level liquidity, profitability, and debt servicing metrics,” it said. This was done by an industry peer analysis on specific financial statement indicators to provide sectoral context to the firm’s performance and added another approach to provide insights into a firm’s short- and long-term liquidity positions over time, said the BSP.
The BSP also did assessment of firm-level concentration and contagion risks by evaluating firm-level concentration and contagion risks and also analyzed the prominence of banks in the payments system. To do this, it generated bank-level systemic risk relevance using cluster analysis of daily sender/receiver payments data.
Other policies and models that BSP improved include: development of market perception indicators such as yield curve and stock index analysis to create risk-on risk-off indicators to gauge market sentiment; maintenance of the Financial Stability Chart Pack which is a collection of macro-financial indicators by integrating and regularly updating different measures of risk and resilience; amendments to the Currency Rate Risk Protection Program (CRPP) Facility; and publication of overnight reference rate.
With updated and improved systemic risk surveillance, the central bank-led inter-agency FSCC has remained confident that amid a low global market volatility, the Philippines can sustain its growth path this year as the country has more control when it comes to its overall macro-financials.
“We find comfort in the broad indications of stability and their effects on the economy,” said BSP and FSCC chair, Governor Eli M. Remolona Jr. earlier.
The council includes, besides the BSP, the Department of Finance, the Insurance Commission, the Philippine Deposit Insurance Corporation, and the Securities and Exchange Commission.
Remolona said among the issues they continue to closely monitor are inflation, price pressures and the government debt.
He said FSCC in general has “recognized that global indicators of market volatility have remained low.”