BSP to refine crisis watch toolkit

The Bangko Sentral ng Pilipinas (BSP) said it will fine-tune its stability indicators to better monitor systemic risks. In a report, the BSP said it has recently expanded its crises surveillance and monitoring toolkit to “guard against possible formation of financial imbalances.” Further enhancements are currently under review, particularly on the Bank Distress Index (BDI) which it uses to monitor episodes that could lead to banking crisis. Sources said the BDI will be expanded to add more sectors that are not adequately captured by other surveillance programs such as the Philippine Composite Index of Financial Stress which measures the degree of financial stress across markets, and the Early Warning System (EWS) used to keep a close eye on currency and debt management. The EWS primarily provide signs of systemic stress and the potential buildup of stress. The Residential Real Estate Price Index (RREPI) is one of the stability indicators. Last year, as part of enhancements to its surveillance and monitoring, the BSP revised banks’ disclosure requirements to improve its risks assessment on their real estate and project finance exposures. The central bank has had to intensify their monitoring of banks’ longer exposures in these types of deals since unlike traditional bank lending schemes, it is a longterm financing that is dependent on the project’s estimated cash flows and not on the credit background of proponents. (LCC)