BSP assures market of appropriate response

The Bangko Sentral ng Pilipinas (BSP) on Friday, March 17, said the central bank will take appropriate actions when warranted to respond to ongoing fallout of US bankruns. The BSP said that given actions already taken by the US government to calm its own market and to a larger extent, the global market, it is closely monitoring developments in the global banking system. “The BSP recognizes the actions taken by banking supervisory authorities to address the potential contagion risk from the closure of banks. Nonetheless, we will respond accordingly as market conditions evolve,” it said. For the fifth day in a row, the BSP and its ranking officials namely Governor Felipe M. Medalla and Deputy Governor Chuchi G. Fonacier who are in charge of banking supervision, have been reiterating assurances that the domestic banking system is well-capitalized with enough liquidity. “The Philippine banking system remains safe and sound. We have shown our resilience through the pandemic, and we continue to be strong in the face of the ongoing turbulence in the global markets,” said the BSP. It added that its “longstanding efforts in consultation with the industry in setting prudent standards and executing risk practices remain the key pillar in safeguarding the interests of the Filipino people. We reiterate our earlier statement that our banks do not have any material exposure to the failed institutions.” On Thursday, Medalla said the latest BSP stress testing exercises “affirm the strength” of the banking sector based on results which showed that “banks’ capital would hold even under extreme stress scenarios.” The BSP, similar with all central banks, employ stress testing excercises to determine a bank’s health in terms of adequate capital and liquidity and the industry’s ability to withstand uncertainties and negative financial shocks. It implements the Uniform Stress Test Exercise and the Real Estate Stress Test, plus several surveillance and early warning systems. Meanwhile, there are three reported US bank failures – California-based Silicon Valley Bank, Silvergate Bank and New York-based Signature Bank. A recent update indicated that another bank in California, First Republic Bank, is now subject to rescue operations by other banks. In Europe, Credit Suisse in Switzerland has taken a lifeline $54 billion loan to deal with its own liquidity problems. The BSP currently supervises 45 universal and commercial banks or the big banks. There are also 43 thrift banks, 400 rural banks and cooperative banks, and six digital banks.