The Philippine financial system remains strong and any damage that the COVID-19 pandemic has inflicted on it is temporary, according to the head of the country’s central bank.
Bangko Sentral ng Pilipinas Governor Benjamin Diokno said regulators are also closely monitoring practices to keep watch against risky behaviour, whether by banks, corporations or small clients.
Speaking on behalf of the Financial Stability Coordination Council, Diokno nonetheless acknowledged that the COVID-19 crisis is different from previous upheavals “because it is a direct shock to the real economy, to supply chains, and to the welfare of families and individuals.”
He sought to give assurances, though, that based on the interagency group’s reading of market indicators and its surveillance of what is happening on the ground, it does “not see any indications as of yet that our financial market has been impaired irreparably.”
“Ultimately, the goal is to ensure that our financial system works for us and facilitates in improving the welfare of individuals, from savers to borrowers, to investors and issuers, to intermediaries, to infrastructure operators, and digital service providers,” Diokno said.
“We are also committed to the value proposition of finance and to making the financial system increasingly resilient to different forms of shocks,” he added.
On Tuesday (July 14), the council — which is composed of the BSP, the Department of Finance, the Insurance Commission, the Philippine Deposit Insurance Corp. and the Securities and Exchange Commission — released its framework on the use of macroprudential policies to manage systemic risks in the financial system.
Systemic risks are disruptions in the financial system which can have negative consequences in the broader economy, while macroprudential policies are the interventions used by the authorities to manage these risks.
Central bank planners began to focus on financial stability in the aftermath of the 2007 global financial crisis, noting that systemic risks needed explicit oversight.
The reforms of the global financial architecture that followed have been premised on making the financial system more resilient from shocks, both from external sources as well as those generated by the financial system itself.
“We offer to the public that no less than the secretary of finance, the heads of the SEC, IC, PDIC as well as the BSP, regularly assess the changing jigsaw puzzle of risk behaviors,” Diokno said.
“We are joined by the Bureau of the Treasury and we collaborate with many agencies and associations to come up with a holistic view of what’s happening and then decide – using this framework that we make available – on what else can be done,” he said.
Based on its models that reflect the linkages within the economy, the council confirmed the interventions that it agreed upon in previous meetings.
It also affirmed its intention to broaden its collaboration with various public-private sector stakeholders, specifically to “reboot” the economic landscape.