Banking reforms continue to bear fruit

January 29, 2019

MANILA, Philippines — The absence of the Bangko Sentral ng Pilipinas Governor during the annual reception for the banking community was hardly felt as major reforms over the past two decades continued to fortify the country’s banking and financial systems.

BSP Governor Nestor Espenilla, who is on extended medical leave as he continues to battle tongue cancer, was only physically absent at the annual event, the central bank’s version of the Malacanang’s vin d’ honneur.

However, the measures he has been putting in place, the reforms he has been working on and his overall efforts of keeping the banking industry strong showed in the warm smiles of bankers and stakeholders who graced the event.

There is no doubt the Philippine banking industry is in a better place now than it was in decades past.

In his speech delivered by BSP officer in charge Chuchi Fonacier, Espenilla highlighted the resilience of the economy amid more than two decades of sound and strategic reforms.

“These reforms have created buffers for the nation to withstand shocks and benefit from a more flexible policy space. The consistently sound and stable condition of the Philippine banking system – a product not only of prudent regulation and risk-based supervision, but of earnest cooperation from the sector itself – is a key anchor of our growing economy,” he said.

Espenilla, who was aptly represented by his lovely wife Tess and daughter Jackie, also noted how strong the sector is with statistics to boot.

Latest data showed assets of the Philippine banking system booked a double-digit 10.3 percent increase to P16.71 trillion in end November last year from P15.15 billion in end November-2017 due mainly to deposit growth.

“Most of these deposits were deployed to lending for productive activities. Loan quality remains satisfactory as banks continue to adhere to sound credit underwriting standards. Meanwhile, capitalization continues to build up, with capital ratios remaining well above national and international thresholds,” Espenilla said in his message.

The reception was surprisingly well attended, despite whispers days before that some bigwigs would be snubbing the event.

Bank presidents and chief executive officers who graced the occasion include Nestor Tan of BDO, Cezar Consing of Ayala-led Bank of the Philippine Islands,

Jose Arnulfo “Wick” Veloso of Philippine National Bank, Alfonso Salcedo of Security Bank, William Whang of China Bank, Cecilia Borromeo of Development Bank of the Philippines, and Gil Buenaventura of Rizal Commercial Banking Corp.

Tobacco and airline magnate Lucio Tan also known as El Kapitan graced the event and lent prestige and strong presence to the occasion. Long time friend and CTBC Bank Philippine vice chairman William Go accompanied Tan whose vast empire also controls PNB.

True enough some VIPs did not make it to Friday’s event but perhaps for varied reasons. BDO chairman Teresita Sy-Coson, for instance, has just laid to rest her father, retail and banking magnate Henry Sy who passed away last week.

Ayala-led Bank of the Philippine Islands (BPI) chairman Jaime Augusto Zobel de Ayala and Robinsons Bank Corp. chairman Lance Gokongwei also failed to attend the annual reception.

In all, the bankers’ night crowd was huge at around 300 and it was as pleasant as an annual reception as any other.

Members of the diplomatic community were spotted, too including US Ambassador to the Philippines Sung Kim — touted as the George Clooney of the diplomatic corps – and US Embassy’s deputy economic counselor Zeenat Syed and Moniot Stephanie of the economic office, Japanese Ambassador to the Philippines Koji Haneda, Australian Ambassador to the Philippines Steven Robinson AO and Australian Embassy’s First Secretary Jenni McEwin.

Former BSP Governors Amando Tetangco Jr. and Ambassador Jose Cuisia were there, too. Aside from Fonacier, BSP Deputy Governors Diwa Guinigundo and Maria Almasara Cyd Tuaño-Amador also graced the occasion.

Finance Secretary Carlos Dominguez and Securities and Exchange chairman Emilio Aquino were among the government officials who also graced the event

Aside from Dominguez, other Monetary Board members including Felipe Medalla, Juan de Zuñiga, Peter Favila, and Antonio Abacan joined Fonacier during the toast.

In his speech, Espenilla laid down many plans and more reforms for 2019 and reiterated the BSP’s commitment to remain vigilant against external shocks.

“As we enter 2019, we do so with excitement – initiatives we launched in the last year, and since the beginning of my governorship in July 2017, shall continue with vigor,” the BSP chief said.

According to him, latest forecasts of the BSP indicate inflation would return to the central bank’s two to four percent range at 3.2 percent this year and three percent in 2020.

Inflation last year breached the target as it climbed to 5.2 percent from 2.9 percent due to higher oil and food prices due to the implementation of Republic Act 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN) Law and supply issues as well as the weaker peso.

This prompted the central bank’s Monetary Board to jack up rates by 175 basis points in five straight rate-setting meetings from May to November to rein in inflationary pressures.

Easing inflation after peaking at a near-decade high of 6.7 percent in September and October allowed authorities to take a breather from its tightening episode last December to allow the economy to absorb the previous rate hikes.

“Nonetheless, we approach the year with utmost vigilance and prudence… mindful of the unfolding global economic landscape,” Espenilla said.

He noted the challenges, too.

“There are still significant lingering concerns and imminent risks particularly on the external front. But we cannot allow these headwinds from deflecting us from our deep financial reform agenda,” he said.

Another challenge, he said, is to adapt to the rapid expansion and reach of technological innovation and deployment of digital financial solutions. These developments need to meet the highest standards of transparency, product suitability, security, and confidentiality to ultimately serve the public.

“Lastly, there is the challenge of keeping an eye out for signs of excessive credit and leverage in the financial system,” he said.

The BSP also remains on course in promoting financial deepening, with measures to further develop the domestic capital and foreign exchange (FX) markets.

“We will continue streamlining documentary requirements for FX trade and non-trade transactions. The BSP will likewise issue a circular on FX market governance framework, formalizing policies that promote fair, liquid, and transparent FX market,” he said.

Indeed, there was no sitting governor that night but Espenilla said in his message that the BSP, as an institution will continue to be there for the banking community and each and every Filipino.

“No one is dropping the ball. The BSP is here with you for the long haul,” the BSP chief said.