June 25, 2018, 1:32 pm
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1 Philippine Peso = 0.06901 UAE Dirham
1 Philippine Peso = 2.02912 Albanian Lek
1 Philippine Peso = 0.03401 Neth Antilles Guilder
1 Philippine Peso = 0.5072 Argentine Peso
1 Philippine Peso = 0.02524 Australian Dollar
1 Philippine Peso = 0.03345 Aruba Florin
1 Philippine Peso = 0.03758 Barbados Dollar
1 Philippine Peso = 1.57159 Bangladesh Taka
1 Philippine Peso = 0.03155 Bulgarian Lev
1 Philippine Peso = 0.00712 Bahraini Dinar
1 Philippine Peso = 32.90079 Burundi Franc
1 Philippine Peso = 0.01879 Bermuda Dollar
1 Philippine Peso = 0.02526 Brunei Dollar
1 Philippine Peso = 0.1289 Bolivian Boliviano
1 Philippine Peso = 0.07111 Brazilian Real
1 Philippine Peso = 0.01879 Bahamian Dollar
1 Philippine Peso = 1.28053 Bhutan Ngultrum
1 Philippine Peso = 0.19402 Botswana Pula
1 Philippine Peso = 376.17437 Belarus Ruble
1 Philippine Peso = 0.03754 Belize Dollar
1 Philippine Peso = 0.02493 Canadian Dollar
1 Philippine Peso = 0.01856 Swiss Franc
1 Philippine Peso = 11.99061 Chilean Peso
1 Philippine Peso = 0.12218 Chinese Yuan
1 Philippine Peso = 54.75385 Colombian Peso
1 Philippine Peso = 10.57591 Costa Rica Colon
1 Philippine Peso = 0.01879 Cuban Peso
1 Philippine Peso = 1.77772 Cape Verde Escudo
1 Philippine Peso = 0.41526 Czech Koruna
1 Philippine Peso = 3.33615 Djibouti Franc
1 Philippine Peso = 0.12016 Danish Krone
1 Philippine Peso = 0.92728 Dominican Peso
1 Philippine Peso = 2.1963 Algerian Dinar
1 Philippine Peso = 0.25225 Estonian Kroon
1 Philippine Peso = 0.33484 Egyptian Pound
1 Philippine Peso = 0.51146 Ethiopian Birr
1 Philippine Peso = 0.01612 Euro
1 Philippine Peso = 0.03918 Fiji Dollar
1 Philippine Peso = 0.01416 Falkland Islands Pound
1 Philippine Peso = 0.01417 British Pound
1 Philippine Peso = 0.08979 Ghanaian Cedi
1 Philippine Peso = 0.87956 Gambian Dalasi
1 Philippine Peso = 169.07178 Guinea Franc
1 Philippine Peso = 0.14072 Guatemala Quetzal
1 Philippine Peso = 3.87599 Guyana Dollar
1 Philippine Peso = 0.14741 Hong Kong Dollar
1 Philippine Peso = 0.44878 Honduras Lempira
1 Philippine Peso = 0.11882 Croatian Kuna
1 Philippine Peso = 1.24803 Haiti Gourde
1 Philippine Peso = 5.23224 Hungarian Forint
1 Philippine Peso = 264.43067 Indonesian Rupiah
1 Philippine Peso = 0.06764 Israeli Shekel
1 Philippine Peso = 1.27568 Indian Rupee
1 Philippine Peso = 22.24728 Iraqi Dinar
1 Philippine Peso = 798.38407 Iran Rial
1 Philippine Peso = 2.03119 Iceland Krona
1 Philippine Peso = 2.45509 Jamaican Dollar
1 Philippine Peso = 0.01333 Jordanian Dinar
1 Philippine Peso = 2.06417 Japanese Yen
1 Philippine Peso = 1.89121 Kenyan Shilling
1 Philippine Peso = 1.28183 Kyrgyzstan Som
1 Philippine Peso = 76.00526 Cambodia Riel
1 Philippine Peso = 7.92522 Comoros Franc
1 Philippine Peso = 16.91094 North Korean Won
1 Philippine Peso = 20.86622 Korean Won
1 Philippine Peso = 0.00568 Kuwaiti Dinar
1 Philippine Peso = 0.01541 Cayman Islands Dollar
1 Philippine Peso = 6.38595 Kazakhstan Tenge
1 Philippine Peso = 158.00451 Lao Kip
1 Philippine Peso = 28.292 Lebanese Pound
1 Philippine Peso = 2.98572 Sri Lanka Rupee
1 Philippine Peso = 2.74709 Liberian Dollar
1 Philippine Peso = 0.25254 Lesotho Loti
1 Philippine Peso = 0.05728 Lithuanian Lita
1 Philippine Peso = 0.01166 Latvian Lat
1 Philippine Peso = 0.02548 Libyan Dinar
1 Philippine Peso = 0.1786 Moroccan Dirham
1 Philippine Peso = 0.3177 Moldovan Leu
1 Philippine Peso = 0.98891 Macedonian Denar
1 Philippine Peso = 25.98647 Myanmar Kyat
1 Philippine Peso = 45.97896 Mongolian Tugrik
1 Philippine Peso = 0.15183 Macau Pataca
1 Philippine Peso = 6.67042 Mauritania Ougulya
1 Philippine Peso = 0.65295 Mauritius Rupee
1 Philippine Peso = 0.29256 Maldives Rufiyaa
1 Philippine Peso = 13.4053 Malawi Kwacha
1 Philippine Peso = 0.37584 Mexican Peso
1 Philippine Peso = 0.07518 Malaysian Ringgit
1 Philippine Peso = 0.25239 Namibian Dollar
1 Philippine Peso = 6.72679 Nigerian Naira
1 Philippine Peso = 0.59207 Nicaragua Cordoba
1 Philippine Peso = 0.15205 Norwegian Krone
1 Philippine Peso = 2.03401 Nepalese Rupee
1 Philippine Peso = 0.02719 New Zealand Dollar
1 Philippine Peso = 0.00723 Omani Rial
1 Philippine Peso = 0.01879 Panama Balboa
1 Philippine Peso = 0.06134 Peruvian Nuevo Sol
1 Philippine Peso = 0.0609 Papua New Guinea Kina
1 Philippine Peso = 1 Philippine Peso
1 Philippine Peso = 2.28222 Pakistani Rupee
1 Philippine Peso = 0.06966 Polish Zloty
1 Philippine Peso = 106.55769 Paraguayan Guarani
1 Philippine Peso = 0.06839 Qatar Rial
1 Philippine Peso = 0.07509 Romanian New Leu
1 Philippine Peso = 1.18236 Russian Rouble
1 Philippine Peso = 15.96073 Rwanda Franc
1 Philippine Peso = 0.07046 Saudi Arabian Riyal
1 Philippine Peso = 0.1479 Solomon Islands Dollar
1 Philippine Peso = 0.25235 Seychelles Rupee
1 Philippine Peso = 0.33738 Sudanese Pound
1 Philippine Peso = 0.16635 Swedish Krona
1 Philippine Peso = 0.02551 Singapore Dollar
1 Philippine Peso = 0.01417 St Helena Pound
1 Philippine Peso = 0.41725 Slovak Koruna
1 Philippine Peso = 149.94363 Sierra Leone Leone
1 Philippine Peso = 10.72905 Somali Shilling
1 Philippine Peso = 394.98309 Sao Tome Dobra
1 Philippine Peso = 0.16441 El Salvador Colon
1 Philippine Peso = 9.67644 Syrian Pound
1 Philippine Peso = 0.25202 Swaziland Lilageni
1 Philippine Peso = 0.61856 Thai Baht
1 Philippine Peso = 0.04882 Tunisian Dinar
1 Philippine Peso = 0.04333 Tongan paʻanga
1 Philippine Peso = 0.08786 Turkish Lira
1 Philippine Peso = 0.12682 Trinidad Tobago Dollar
1 Philippine Peso = 0.56924 Taiwan Dollar
1 Philippine Peso = 42.63435 Tanzanian Shilling
1 Philippine Peso = 0.49267 Ukraine Hryvnia
1 Philippine Peso = 72.51597 Ugandan Shilling
1 Philippine Peso = 0.01879 United States Dollar
1 Philippine Peso = 0.59451 Uruguayan New Peso
1 Philippine Peso = 147.50094 Uzbekistan Sum
1 Philippine Peso = 1499.4363 Venezuelan Bolivar
1 Philippine Peso = 430.10147 Vietnam Dong
1 Philippine Peso = 2.07159 Vanuatu Vatu
1 Philippine Peso = 0.0488 Samoa Tala
1 Philippine Peso = 10.56614 CFA Franc (BEAC)
1 Philippine Peso = 0.05073 East Caribbean Dollar
1 Philippine Peso = 10.56614 CFA Franc (BCEAO)
1 Philippine Peso = 1.92165 Pacific Franc
1 Philippine Peso = 4.69466 Yemen Riyal
1 Philippine Peso = 0.25241 South African Rand
1 Philippine Peso = 97.51033 Zambian Kwacha
1 Philippine Peso = 6.80008 Zimbabwe dollar

Ready in the Age of Great Convergence

SBC Chairman Alberto Villarosa; President and CEO Alfonso Salcedo, Jr.; Department of Finance Undersecretary Gil Beltran; fellow speakers/panelists, esteemed guests; ladies and gentlemen, good afternoon.

It is a pleasure to be here at Security Bank‘s annual Economic Forum, to discuss developments and prospects in the global and domestic economy and to take stock of challenges ahead. 

At present, four key financial sector issues seem top of mind. First, is uncertainty over the pace, timing, and magnitude of tightening of global financial conditions. The potentially divergent monetary policies of advanced economies (AEs) would likely trigger bouts of volatility in the financial markets. 

Second, is peso volatility with specific concern over its possible sharp depreciation.

Third, is the perceived risk of overheating in the economy.

And fourth is the challenge of disruption brought about by fintech.The use of digital technologies challenges the status quo, even making an impact on monetary policy.   

Anchors of Stability

We can rely on several anchors of stability to manage these pressing issues. 

The Philippines sustained its robust macroeconomic fundamentals.  It is one of the fastest growing economies in the world,with 75 consecutive quarters of uninterrupted and increasingly broad-based growth.  Annual growth has been running above 6 percent in the last five years.

 For the third quarter of this year, GDP picked up to 6.9 percent.  

Prospects remain bright as growth is predicted to be between 6.5 and 7.5 percent this year and 7.0 and 8.0 percent over the medium-term.  Growth will be increasingly investment-led as government and private sector investments ramp up.

The stable inflation environment provides support to domestic demand. Inflation has averaged 3.2 percent in the past ten months, in line with the 2017 target.  Latest baseline forecasts show it will likely settle around the middle of government’s target range of 2 - 4 percent in 2017 to 2019.

We are ready to deploy the full array of our monetary policy toolkit to deal with possible market volatility as policy settings evolve and normalize in the US and other advanced economies.  We are also watchful of geo-political risks that could pose challenges to the country’s trade, remittances, and foreign direct investments.  

Recently, the depreciation of the peso has been a cause of some market unease.  Such concern is overdone.

The peso‘s moderate and controlled depreciation mirrors bullish economic growth indicated by strong imports demand, residents’ increased direct and portfolio investments abroad for expansion and risk diversification; as well as public and private sector debt prepayments to manage foreign exchange risks.  There is also outflow of hot money.  We see these as healthy adjustments. 

The peso is expected to be broadly stable over themedium-term, backed by strong underlying economic fundamentals, ready market access, and robust international reserves.  Our foreign exchange reserve buffer, as of end-October 2017 stands at $80.6 billion.  This is equivalent to more than 8 months’imports of goods and services and is greater than our foreign exchange liabilities.  We have additional liquidity buffer as well from our regional safety net arrangements.  

Sustained inflows from overseas Filipino remittances, business process outsourcing, tourism receipts, and the strong recovery in exports further support the peso.  We can likewise look forward to increased foreign direct investments that are attracted by our growth prospects.  With the country’s external debt on a sustainable downtrend and ample fiscal space, there is scope to pursue high quality investmentsin physical and human capital that will expand potential output.  

At the current range, the peso’s competitiveness has improved back to 2008 levels as measured by the real effective exchange rate (REER) index.

The Philippine banking system is very stable and very dynamic, with good asset quality, sustained profitability, and adequate capitalization. For the third quarter of this year, total banking system resources expanded by 14.1 percent year-on-year, to P14.6 trillion. This was funded by sustained deposit inflows which grew by 15.3 percent, to P11.3 trillion. 

The non-performing loan (NPL) ratios further improved to 1.9 percent, with adequate and prudent provisioning for credit losses. 

Bank capital is being beefed up by strong earnings from core income sources particularly lending activities. Capital adequacy ratio, recorded at 16.0 percent on consolidated basis, is well above the BSP and international minimum. 

The risk of economic overheating has been raised by some analysts.  We do not believe we are there yet and we remain very vigilant to avoid it.  The current pace of credit growth is manageable . Our credit-to-GDP ratio of 63.6 percent as of Q2 2017 is still one of the lowest by far in Asia, indicating relatively low overall leverage.

Bank loans are diversified across economic sectors and are backed by durable economic activity with 89 percent going into production sectors.  Moreover, BSP monetary operations indicate just sufficient domestic liquidity to support expansion.  Amid the stronger growth in liquidity, inflation dynamics remain manageable.

Key indicators of credit expansion likewise arebelow established international thresholds. Current property prices, as reflected by latest Colliers data and the latest BSP Residential Real Estate Price Index (RREPI), also do not show misalignment from fundamental values. 

We continue to closely monitor credit growth and risks to overheating, even as we stand ready to deploy macroprudential measures if necessary, to deal with sectoral issues in a targeted way.

Staying ahead

Economist Richard Baldwin published a book in November 2016 on the four phases of global economic evolution. According to him, the fourth phase (1990 to the present) is The Great Convergence, characterized by globalization of knowledge and information resulting from the information and communication technology (ICT) revolution. 

To stay abreast, we must adopt new tools and policies. As products, services, and processes evolve, the BSP constantly expands its policy toolkit to include macroprudential measures, surveillance tools, and stress indices such as the early warning system (EWS) on currency crisis and the Philippine Composite Index of Financial Stress (PCIFS).

Weare upgrading our monetary operations framework:  The interest rate corridor (IRC) system was deployed last year to enhance the monetary policy transmission mechanism.  The IRC is also compatible with the further development of our capital market.  We shall continue to enhance the IRC for a more market-friendly implementation of monetary policy.

We continue to pursue progressive prudential reforms to maintain the financial system’s resilience against external shocks.

Since the start of this year, the BSP implemented reforms to upgrade corporate governance and risk management standards, and to promote financial system integrity and transparency.  Good governance is the backbone of a safe and stable financial system. Consistent with this, we have also enhanced the reporting governance of banks.

We have seen significant progress in the adoption of Basel III reforms, particularly in the areas of capital, leverage, liquidity and regulation of systemically important banks.  More recently, we have rolled out a four-phased program for liquidity risk management. 

The first phase, which was approved by the Monetary Board through Circular No. 981, covers guidelines on liquidity risk management, including intraday liquidity. Next in the pipeline are amendments to the LCR standard and  issuance of the complementary Minimum Liquidity Ratio (MLR), a simplified version of the LCR requirement for less complex financial institutions.  Third, we will issue guidelines implementing the Net Stable Funding Ratio (NSFR) standard to ensure that banks have adequate long-term stable funding. Lastly, the BSP will issue intraday liquidity reporting guidelines to complement the qualitative intraday risk management guidelines under Circular No. 981.

In line with the upcoming full adoption of thePhilippine Financial Reporting Standards Financial Instruments(PFRS 9), a consultative document on the “expected credit loss” model was released. In 2014, BSP started preparing banks on the use of the expected loss methodology through Circular No. 855. Parallel to this, we will enhance the Pillar 3 disclosure requirements for incorporation in banks’ annual reports. The guidelines on accreditation of external auditors across sectors are also being reviewed. These reforms promote market discipline, transparency, and resiliency.

Financial Market Development

Part and parcel of our strategic policy reforms is to accelerate financial market development with particular focus on local currency debt and foreign exchange (FX) markets. We envision a more balanced financial ecosystem where the banking system is complemented by a deep and liquid capital market. This can support the long-term financing requirements of corporates and the Government, particularly with the “Build, Build, Build” program roll out.

As you know, the BSP, in collaboration with the SEC, DOF and the Bureau of the Treasury (BTr) is working on a package of initiatives to be rolled out in a sequenced approach to ensure smooth implementation.  The reform agenda will officially start with the launch of the Government Securities Repo Program on November 27 2017, in coordination with industry associations.  

Through nine waves of reforms since 2007, the BSP has undertaken measures to liberalize the foreign exchange (FX) market. Currently, we are pursuing even more ambitious FX reforms aimed at deepening the FX market and increasing resilience of our domestic economy against external shocks, even as we continue to allow greater exchange rate flexibility.  This demonstrates a thrust towards greater openness given the country’s increasing integration with global markets.  

Soon, the BSP will release an exposure draft on the liberalized rules on foreign currency borrowings of the private sector to move away from prior BSP approval, simplify the registration process to primarily focus on information gathering, and minimize documentary requirements.

 Other future amendments will address unnecessary friction on investment and other transactions.  

Over the medium term, we are implementing a sequenced approach that will enhance market conduct, increase FX market transparency, and promote a market-determined exchange rate  consistent with the characteristics of an organized FX market.

Taken together, the FX and domestic debt market development initiatives are complementary reforms that will deepen market liquidity, establish a more reliable reference yield curve for domestic interest rates, and strengthen market integrity.  These reforms will pave the way for more innovation and increased availability of financial products that meet diverse funding requirements with more choices and more flexibility.  These will also enable the creation of hedging instruments that enhance risk management capabilities of banks, corporates, government units, MSMEs, and the general public. 

Dealing with Disruptive Technology

At the BSP, we have a very open-minded approach to Fintech. This means that we take a very active role in ensuringthat our policy provides opportunities for innovation that can help advance inclusive growth and deliver more efficient financial services.  At the same time, we want to ensure risks are well managed, particularly technology, money laundering/terrorist financing, and consumer protection risks.  

As far as I know, we are a pioneer among central banks in using the “test and learn” approach, now known as regulatory sandbox, to allow controlled roll-out of new financial technology.  

Even as we allow fintech into our system, we are mindful of related risks.  Earlier this year, we issued various regulations aimed at mitigating the effects of technology risks, as well AML/CFT concerns.  These include comprehensive supervisory frameworks for money service businesses and pawnshops to ensure effective AML compliance. This also extends to entities that use virtual currency as underlying instruments for remittance.  To date, there are two virtual currency exchanges registered with the BSP with several more under evaluation.  

We have also allowed proportionate and technology-enabledKnow-Your-Customer (KYC) procedures for low-risk clients to facilitate frictionless customer on-boarding.  More recently, the Monetary Board approved the cyber security risk management framework under Circular No. 982.

Finally, we are pursuing digitization of the payment system as part of our firm commitment to the national strategy for financial inclusion.  

The BSP is actively working to make universally available to all a basic transaction account in a bank or regulated non-bank financial institution, to be able to send and receive payments via any electronic device.  At the same time, we are working with other government agencies and Congress to establish a biometric national ID system.  These two -- universal transaction accounts and a digital ID system – are key foundations of a robust and inclusive digital financial system.

We are one step closer to achieving the vision of a cash-lite economy with the recent launch of the Philippine Electronic Fund Transfer (EFT) System and Operations network, also called “PESONet” last November 8, 2017.  This is the first Automated Clearing House (ACH) under the National Retail Payment System (NRPS).  It supports batch payment credit transactions and will eventually replace paper check payments for most applications.  Early next year, we will launch “InstaPay”, the ACH for low-value real time push payments ideal for mobile payments in support of e-commerce.

More critical role

Ladies and gentlemen, the heightened convergence of the global and the domestic economy, fuelled by ICT revolution, is a force to reckon with. One has to catch opportunities created by these big changes and adapt to manage new risks.  As economic agents seek novel ways of doing things, the role of BSP becomes more critical.  In this regard, we assure of our commitment and capability to foster an enabling environment so we are ready in the age of the Great Convergence. 

Thank you for your kind attention.
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