PH now better protected vs systemic risks, says BSP
The Philippines’ financial regulators will be in a better position to protect the country’s economy from so-called systemic risks after President Duterte signed an order institutionalizing an interagency body that will coordinate actions against emerging threats of instability.
In an online briefing, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said the now permanent organization would have the power to issue regulations, collaborate with third parties to collect data, streamline financial stability initiatives and coordinate with authorities of other countries.
Mr. Duterte recently signed Executive Order (EO) No. 144 institutionalizing the Financial Stability Coordination Council (FSCC) which had been operating on a voluntary basis since 2011. “While the FSCC has been working quietly over the past decade, the EO gives the Council a formal legal standing,” said the central bank chief, who was also designated ex officio chair of the group. “This is a much-needed support for the continuing efforts to collectively address systemic risks.”
The FSCC consists of the BSP, the Department of Finance, the Securities and Exchange Commission, the Insurance Commission and the Philippine Deposit Insurance Corp.
The Palace order also strengthens the group’s capacity to provide appropriate analysis that is the basis of any intervention.
Despite its main mandate of protecting the country against financial instability, the group will continue to function even during normal times in preparation for crisis situations.
Diokno said the resilience that regulators want for the country “is built during normal times and treated during stressed situations.”
It is this interplay, he said, which provides learning opportunities for building a more resilient economy and financial system.
He said there was a need to institutionalize the work of the FSCC because systemic risks “can arise from anywhere.” As such, there may be risks in the future that may fall outside the scope of work of each individual regulator, but may be captured by a bigger organization with a wider scope of responsibility.
“Underlying systemic risks may cover issues that were not in the initial contemplation when the respective charters of FSCC members were formalized,” Diokno said. “The EO gives us both coverage and depth in managing systemic risks, which is at the heart of financial stability.”
He also pointed out that financial stability was “much more than the absence of instability.”
“It is about resilience to unexpected future shocks, and should these shocks materialize, for the system to be best able to recover in the shortest possible time,” the central bank chief said.
