MACTAN. –Bangko Sentral ng Pilipinas (BSP) Governor Felipe Medalla stressed that, as the world tries to navigate a path forward, the changing times highlight the importance of collaboration specifically for countries in the Asian region.
Medalla led the 23rd Financial Stability Board Regional Consultative Group for Asia (FSB-RCGA) Meeting held in Cebu last week.
“This RCGA meeting comes at a very opportune time. Over the last three years, we have experienced shocks that are unprecedented in many respects. These have been trying times for financial authorities,” Medalla said.
“For Asia, collectively, we are poised to continue [to account for] the bulk of economic growth for the entire world. From my perspective, the key is [to make] the reference to Asia — although it is very hard to refer to it — as a single entity. But we, I think, can work together, and this diversity actually presents a lot of opportunities, just as it is fraught with challenges. Where all these put us is that we face a lot of interlinked uncertainties at both regional and global levels. These affect all of us. One can easily make the case that global disruptions require global solutions,” Medalla said.
FSB Chairman and President of De Nederlandsche Bank Klaas Knot, FSB Secretary General John Schindler, and FSB-RCGA co-chair and Reserve Bank of India Deputy Governor Rajeshwar Rao together with 17 Asian jurisdictions participated in the meeting.
The RCGA members discussed the work program of the FSB and how this impacts on Asia.
There were specific sessions on global vulnerabilities, the increasing role of non-bank finance as well as on crypto-assets. The body provided inputs to the reference documents, including the proposed framework on crypto-assets.
The FSB-RCGA brings together national authorities responsible for Financial Stability in 17 jurisdictions. Its members include the financial authorities from Australia, Brunei Darussalam, Cambodia, China, Hong Kong SAR, India, Indonesia, Japan, Korea, Malaysia, New Zealand, Pakistan, Philippines, Singapore, Sri Lanka, Thailand, and Vietnam.
The FSB-RCGA Meeting came after the BSP and the International Monetary Fund (IMF) jointly hosted the 2023 International Conference on Financial Stability held also here in Mactan.
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.
Medalla highlighted lessons learned during past crises, namely building up of strategic forex reserves and enhancing rules on bank capitalization, liquidity, and risk management.
“Moving forward, 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. “It’s finding the middle [where] there’s enough creativity [encouraged] but without thinking in terms of the public cost of mistakes,” Medalla said.
Today’s environment, according to Medalla, poses a different set of challenges for the authorities as well as the market stakeholders.
The conference is then organized to assess how systemic risks are managed and discuss how stakeholders have coped with changing market conditions.
There is likewise a discussion on the challenges of communicating risk issues to the public.
One of the conference highlights is to focus on Asia as a collective body in light of the systemic risk issues affecting the global economy.
The conference revisits the issue of a common approach in light of the latest IMF forecast where Asia contributes around 70 percent of world growth in 2023.
In January 2019, the BSP and the IMF co-hosted the inaugural regional dialogue on Financial Stability which was held in Manila.
Now in 2023, Systemic Risk management was once again front and center as authorities respond to the current challenges and prepare for what lie ahead.
