BSP under new chief to stay course on reforms
Gov. Amando M. Tetangco, Jr., as he committed to beef up the central bank’s reform agenda.
In his farewell speech, Mr. Tetangco touted that his 12-year run as central bank governor saw the “ideal convergence” of low inflation — which dropped to a 3% average from 2011- 2016 from 5.2% in 2005- 2010 — and rapid economic growth, which clocked a 6.1% average over the last five years coming from 4.9% between 2005 and 2010.
The country also bagged investment grade status in 2013, as the three biggest international credit raters took note of the Philippines’ sound fundamentals and its stable, growing banking system.
BANK RESERVE REQUIREMENT
Mr. Espenilla, 58, brings with him 36 years of central bank experience as he assumed the top post on Monday for a six-year term ending in July 2023. He previously served as deputy governor for the supervision and examination sector, which carries out the BSP’s tasks as banking regulator. Changes being considered by Mr. Espenilla include reducing at an “appropriate” time the 20% reserve requirement ratio ( RRR) imposed on universal and commercial banks. “We need to find a path to lower the reserve requirement without compromising price stability. I’d like to see that happen, but it is a discussion in the Monetary Board,” the new governor told reporters after the ceremony. “It’s not going to happen immediately, but it has to be within a reasonable range because... it is an inefficiency to the financial system.” Talks to cut the reserve standard date back to June 2016 when the BSP migrated to an interest rate corridor scheme and introduced weekly term deposit auctions to prod banks to be more aware of their liquidity positions. The curr e n t 20% RRR is deemed one of the highest in the world.
Mr. Espenilla added that the auction volumes and tenors under the weekly term deposit facility have been under constant review, but any change would have to be data-driven.
The new central bank chief committed to “fine-tuning” monetary policy to make the BSP’s tools even more market-oriented, and in turn help develop the domestic money and capital markets.
He also intends to “lower the cost of doing business, provide more customer choices, promote efficiency, and encourage innovation” among players, while also ensuring financial inclusion and shared and “meaningful” economic growth.
“We need to work on bringing central banking operations closer to the people,” Mr. Espenilla said.
At the same time, the veteran central banker flagged potential risks that have aggravated uncertainty across global markets.
“We have to be prepared as well for the seemingly imminent wind-down of ultra-easy monetary policies in advanced economies,” he said.
“We need to be mindful of such events and their potentially far-reaching consequences since these could undermine our economic performance and disrupt our carefully laid plans.”
The United States has been pursuing policy normalization since a 25-basis-point increase in key interest rates in December 2015 — followed by three other hikes of the same magnitude up to last month — after close to a decade of near-zero levels to help the US economy then recuperate from the December 2007June 2009 “Great Recession.”
Rapid technology development and robust social media activity are likewise reshaping the financial system, with the regulator looking for the perfect balance between allowing new banking channels and rising cybercrime threats.
Mr. Espenilla took his oath of office before Finance Secretary Carlos G. Dominguez III yesterday morning, together with new Monetary Board members Antonio S. Abacan, Jr. and Peter B. Favila. Former socioeconomic planning secretary Felipe M. Medalla also took his oath for a second term in the BSP’s policymaking body. With his appointment, Mr. Espenilla now heads the Monetary Board as well as the Anti-Money Laundering Council (AMLC).
Mr. Espenilla said he supports amendments to the BSP Charter, additional powers for the AMLC, easing of the deposit secrecy law, passage of a payment system law, and of the Islamic Banking Act that are all pending in Congress.