MACTAN. – The Bangko Sentral ng Pilipinas (BSP) yesterday reiterated the need to further crises-proof financial institutions versus systemic risks as “global developments invariably spillover to various jurisdictions.”
Felipe Medalla, BSP governor, said today’s environment poses “a different set of challenges for the authorities as well as the market stakeholders.”
He highlighted lessons learned during past crises, namely building up of strategic forex reserves and enhancing rules on bank capitalization, liquidity, and risk management.
“Regulators should continue to strike a careful balance between establishing strong institutions while encouraging innovation in the design of tools that would have the requisite safeguards to build-in resilience. This balance would help crisis-proof the system,” Medalla said.
“It’s finding the middle where there’s enough creativity encouraged but without thinking in terms of the public cost of mistakes,” he added.
One example Medalla cited are corporates’ exposures and investments abroad.
“We are not really sure that our data on firms’ exposure and their investment abroad is complete. We actually wish we had even more complete data and under the law, we can actually ask them how much they have borrowed from abroad and in what currency, right, and what are the maturities,” Medalla said.
“The Philippines is a very legalistic country and my own view is that our laws do not prevent us from asking them those questions because after all we ask households so many questions, right. We should have a very, very good database of corporates’ exposures,” Medalla said.
The BSP and the International Monetary Fund (IMF) jointly opened the two-day 2023 International Conference on Financial Stability yesterday.
Joining the conference were 14 central banks and financial authorities from the region as well as six regional and global organizations. The private sector was fully represented with 31 organizations.
The theme of the conference, “The New Frontier of Financial Stability: Global Problems, Global Solutions, Local Challenges,” suggested that global developments invariably spillover to various jurisdictions. The participants of the conference then looked at how Asia can find a collective solution.
The conference is then organized to assess how systemic risks are managed and discuss how stakeholders have coped with changing market conditions. There is also a discussion on the challenges of communicating risk issues to the public.
