New law to make BSP more effective vs inflation

The revised charter of the Bangko Sentral ng Pilipinas (BSP)—signed into law by President Duterte earlier this month—will make the country’s monetary regulator more effective in fighting inflation, better able to protect bank depositors’ money and improve financial inclusion in the country, officials said.

In a press briefing, BSP Deputy Governor Cyd Tuaño-Amador explained that, with the new law, the central bank would now have “the authority to issue negotiable certificates of indebtedness, even during normal times.”

This means that the BSP can issue and sell its own bonds to private parties in order to mop up excess liquidity from the financial system and, in the process, arrest even nascent inflationary threats emerging over the horizon.

Tuaño-Amador also explained that the new law also restored the authority of the regulator to obtain data from any private person or entity for the purposes of inflation planning.

On the inflation front, the new law also mandated the central bank to use a broader set of indicators than just outmoded aggregates (like broad money supply in the financial system) as “guiding principles in monetary administration.”

One key provision is a requirement for banks to seek the approval of the regulator before its owners can sell at least 10 percent of voting shares of stock to another party.

The schedule of penalties for various banking violations was also updated to reflect current price levels, with monetary sanctions being raised to as high as P2 million per violation, compared to the previous cap of P200,000—a tenfold increase.