MANILA, Philippines—The Philippines’ financial regulators are urging stakeholders to remain prepared against the threat of systemic risks to local markets with the level of uncertainty surrounding the effects of the COVID-19 pandemic still high.
In a statement, the Financial Stability Coordination Council—chaired by Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno—reiterated the importance of vigilance and preemptive thinking against the backdrop of an uneven pace of recovery across jurisdictions.
“We are definitely better off today than a year ago,” he said at an online briefing during the launch of the latest Financial Stability Report which highlighted signs of recovery but also reminded that market conditions remain fluid.
“The ongoing recovery from old risks can generate a new set of potential risks,” the central bank chief said. “We need to continuously track these potential systemic risks, and act when warranted.”
The council is an interagency body that brings together the heads of the BSP, the Department of Finance, the Insurance Commission, the Philippine Deposit Insurance Corp. and the Securities and Exchange Commission in an attempt to head off potential risks to the country’s financial system.
During the briefing on Wednesday afternoon, Diokno said “many aspects of the future remain uncertain and with uncertainty, risk aversion in financial markets may not be too far behind.”
Among others, the latest financial stability report takes a quick look at the effects of COVID-19 with a full year’s worth of data in place. It reiterated that debt servicing remains the main risk, a point that the council disclosed in its earlier statement on the state of financial stability in the country.
The report added that recovery from the recession is happening differently from one country to another, describing this “divergence” where smaller economies like the Philippines face added risks through movements in financial prices in the international market.
The report also discusses altered market conditions in the education, retail trade and commercial real estate sectors.
“We make a conscious effort to look at industry-level issues as part of the effort to reduce uncertainties. We will look at other industries but these three are important to our recovery and our future,” Diokno said.
Finally, the report looks at how the council will carry out its agenda moving forward. Aside from its surveillance framework and the tests that it intends to conduct, it outlines the communication strategy of the interagency group.
It enumerates five foundational messages which it describes as building blocks, and identifies its stakeholders that cover market players, analysts, the academe, media and the public, as well as other government authorities.
These reflect the council’s core thinking that managing systemic risks is a complete initiative that will improve the welfare of Filipinos.