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Speech by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), at the43rd National Disability Prevention and Rehabilitation Week, 18 July 2021.	Benjamin E Diokno: Empowerment of persons with disabilities through digital financial inclusion Speech by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), at the43rd National Disability Prevention and Rehabilitation Week, 18 July 2021. * * * Good day to everyone. The Bangko Sentral ng Pilipinas is pleased to join the celebration of the 43rd National Disability Prevention and Rehabilitation Week. This year’s theme of “Kalusugan at Kaunlaran ng Pilipinong May Kapansanan, Isulong sa Gitna ng Pandemya” is timely and very much aligned with the thrust of the BSP. The COVID-19 pandemic, while sparing none, has worsened difficulties for our most vulnerable and overlooked segments. Socioeconomic gaps, including access to vital services, have widened. Empowerment could thus not be a greater imperative. This is why we at the Bangko Sentral ng Pilipinas believe that empowering our kababayan, especially in these extraordinary times, can lead to a better financial future and propel us to post-pandemic recovery and growth. The empowerment of the vulnerable sectors has always been an underlying objective of the BSP’s efforts. For this reason, we are continuously stepping up our financial inclusion efforts to ensure financial services are within easy reach for all Filipinos, including Persons with Disability. With access to a wide range of financial services, Filipinos can better manage their finances, seize income opportunities, and build financial resilience. Financial inclusion therefore empowers individuals to improve not only their welfare, but also that of their family and community. The need for financial inclusion has been highlighted by the pandemic as people needed to transact digitally. People who had a transaction account were able to safely and conveniently conduct financial transactions through their mobile devices at the comforts of their home. This crucial capability for digital transactions should be within reach by every Filipino in the new, and increasingly digital, economy. The BSP has therefore committed that by 2023, at least 70% of adult Filipinos own and use a formal account, and at least 50% of retail payment transactions are performed digitally. We are optimistic of achieving these targets, even earlier than planned. Over the years, the BSP has laid down the foundation for financial inclusion through our regulations and initiatives to build the inclusive digital finance ecosystem. With the pandemic, financial inclusion has been recognized further as an urgent national development agenda, rightly necessitating a whole-of-nation approach. The Philippine Statistics Authority has been ramping up its implementation of the Philippine National ID System or PhilSys which will be a gamechanger for financial inclusion addressing, long-standing barriers to account ownership in the informal and low-income sector. Meanwhile, on March 10 this year, President Rodrigo Roa Duterte signed the Executive Order No. 127 as a policy reform to expand the satellite broadband market to speedily connect 1/2 BIS central bankers' speeches underserved rural communities. This will enable rural communities to join the digital economy and partake of its benefits. Sa pamamagitan ng PhilSys at pagpapalaganap ng mobile at internet access sa ating bansa, masmarami pang Pilipino ang mahihikayat na gumamit ng digital financial services. Kasama rito ang ating mga kababayan na PWD. We laud the National Council on Disability Affairs and other stakeholders for upholding and protecting the rights of the PWD sector. Rest assured that the Bangko Sentral ng Pilipinas is committed to continuously engage the sector so we can better respond to your needs. Naririnig po namin kayo. In July 2020, we introduced enhanced tactile marks in our banknotes to aid the elderly and visually impaired in identifying denominations easier. The BSP is also now exploring the addition of braille functionality to our banknotes, which aims to benefit as many as 2.5 million visually impaired Filipinos. We recognize that many members of the PW D are highly vulnerable to and experienced unfair practices. We are reminding banks and other BSP-supervised financial institutions to enforce non-discrimination policies and promote access to welfare-enhancing financial services of our PWD sector. We hope this webinar will be informative and serve as a platform for deeper engagement to promote the financial welfare and empowerment of our country’s PWD sector. Sama-sama nating isulong ang kaunlaran ng Pilipinong may kapansanan sa gitna at lampas ng pandemya. Maraming salamat po. 2/2 BIS central bankers' speeches	central bank of the philippines	2,021	8
Message by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), for the MSME (Micro, small and medium-sized enterprises) Day "Negosyo Bounce Back", 18 July 2021.	Benjamin E Diokno: Micro, small and medium-sized enterprises (MSME) Message by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), for the MSME (Micro, small and medium-sized enterprises) Day “Negosyo Bounce Back”, 18 July 2021. * * * A pleasant morning to all the speakers and participants of today’s webinar entitled “MSME Day: Negosyo Bounce Back”. Thank you Investree Philippines for this initiative, which aims to inspire and equip our entrepreneurs towards business recovery and growth through innovative financing solutions. The Bangko Sentral ng Pilipinas (BSP) has always supported programs that will steer the country’s economy towards a strong and sustainable path to recovery. As more vaccines arrive, and as a greater share of the population gets vaccinated, we move closer towards a new economy that is ‘better, safer, and more technologically ready'. MSMEs in the New Economy MSMEs are agile to adapt their business ventures to this new economy. They have taken advantage of the opportunities brought about by digitalization, such as e-commerce and digital payments. In fact, data from 1st quarter of 2021 show the combined volume of electronic fund transfers through PESONet and InstaPay hit 107 million transactions with total value of P1.5 trillion. Volume grew by 365% and value by 171% compared to the same period in 2020. This trend may be primarily driven by the desire to serve and retain their client-base, but it has also enabled MSMEs to expand their market. Digital payment streams can also broaden MSMEs’ access to finance. Digital records of sales and payment transactions can be used in assessing the creditworthiness of a business which will unlock access to other welfare-enhancing financial services such as digital credit, insurance, and investment, among others. BSP’s Priority Initiatives for MSMEs The BSP has introduced a package of regulatory relief and incentive measures to ensure that banks would continue to lend to the MSME sector amid the pandemic. The BSP is also aggressively undertaking various initiatives that will provide lasting benefits for MSMEs even after the pandemic. Our Credit Risk Database (CRD) project in partnership with the Government of Japan aims to improve access to finance for SMEs by lessening banks’ dependence on collateral during credit evaluation. Instead of collateral, the CRD’s risk-based lending approach uses credit scoring models to assess the capacity of SMEs to repay their loans. We continue to work on the Credit Surety Fund (CSF) program, alongside the Cooperative Development Authority. As a credit enhancement scheme, the CSF provides security for loans of MSMEs by way of a surety cover. With support from the various banking industry associations and the Department of Trade and 1/2 BIS central bankers' speeches Industry, the BSP will introduce the adoption of a standard business loan application form which will make the loan application documents of banks simple and borrower-friendly. To better help us better understand the needs and challenges faced by the MSME sector, the BSP is supporting the Asian Development Bank in conducting a national MSME Survey. This survey will generate new insights and more granular data on MSME access to finance. We are also supporting the adoption of innovative financing schemes such as the Agriculture Value Chain Financing and Supply Chain Financing to enhance the bankability of agri-businesses and MSMEs and to increase the capacity of financial institutions in serving these underserved market segments. Digital Financial Inclusion of MSMEs The BSP has launched initiatives that will fast track the digital transformation of the financial ecosystem. For instance, the establishment of digital banks is envisioned to bring about greater efficiency and facilitate virtual reach of financial products and services among the unbanked, including MSMEs. Last April we extended the payments use case of the QR Ph to include person-to-merchant or P2M. With the use of QR technology, small merchants are presented with a simpler and more affordable payment facility as compared to costly point of sale terminals. We are also looking forward to the full implementation of our digital ID – the Philippine ID System or Philsys. More than 11 million Filipinos have completed the registration of their demographic and biometric data. PhilSys will address the lack of identity document which is an oft-cited barrier to account opening. Beyond seamless digital onboarding, PhilSys can facilitate greater innovation in digital financial services. Innovation and Partnerships Towards Inclusive MSME Financing All these developments sound promising. But the BSP and the government cannot solve the MSME challenges alone. We need the support of all relevant players, including industry innovators, to help bridge the financing gap that has long hampered the growth of MSMEs. We welcome innovative solutions that leverage on data and digital technologies in providing wider financing options and tailored financial products to our MSMEs. Closing Let us continue to work together in building an ecosystem where MSMEs can flourish and reach their full potential. Thank you and have a good morning! 2/2 BIS central bankers' speeches	central bank of the philippines	2,021	8
Welcome remarks by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), for the Asia School of Business Online Course for the Financial Stability Coordination Council, 18 July 2021.	Benjamin E Diokno: Welcome remarks - Asia School of Business Online Course for the Financial Stability Coordination Council Welcome remarks by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), for the Asia School of Business Online Course for the Financial Stability Coordination Council, 18 July 2021. * * * Good morning to everyone and welcome to the first course structured by the Asia School of Business for the Financial Stability Coordination Council. I’m very pleased to welcome a dear friend of the BSP, former Negara Malaysia Governor DR. ZETI AKHTAR AZIS who now co-chairs the ASB. Let me also extend my warm greetings to MR. CHARLES FINE, President and Dean of ASB, DR. TRIW IT ARIYATHUGUN, Assistant Professor of Economics, DR. HANS GENBERG, Professor of Economics and Senior Director of Banking and Finance Program, and of course to my old friend who needs no introduction, DR. ELI REMOLONA, the Director of Central Banking at ASB. The Financial Stability Coordination Council has been actively looking at secondary market asset prices for signs about the market and their potential systemic risk concern. We have had active discussions about our yield curve and its incentive structure as market condition evolve, both in the Philippines and in established offshore markets. As part of our intent to better survey risk behaviors, we have been exploring various opportunities for learning, to enhance the capacity of our FSCC colleagues, and to address our mandate. The bar of accountability on that mandate has been raised, with the President signing Executive Order No. 144. With the legal authority to now issue guidelines and regulations related to managing systemic risks, it is important more than ever for the FSCC to see what market players see, and for us to influence risk behaviors in ways that develop markets and build resilience. This is why this course is important, particularly at this critical time. We hear of the divergent paths of recovery from Covid-19 and how movements in Advanced Economies are affecting Emerging Economies and Developing Economies. No matter how you work on the analysis, this divergence should be evident in market prices, alongside portfolio flows and reflows. The global economy is patently interconnected through the pipeline of bond and credit markets. While economists are comfortable with comparative advantage on the trade side, risk behaviors in financial markets are much more fluid, and respond more quickly to changing incentives. Those incentives, again, are all about visible prices in the open market and government securities provide the immediate natural platform. In this interconnected world, partnerships are critical. I am excited for the FSCC to build this partnership with the ASB. We leverage this market of experience and ideas from the best. Of particular interest to me is that ASB itself is a partnership that brings together the best talents and the broadest experience from different parts of the world. This puts the FSCC in an envious position. We are partnering with the best to better ourselves so that we too can, one day soon, be the best at what we do. This is not about status. It is about making FSCC an engine of improving the welfare of the 1/2 BIS central bankers' speeches Filipino public. This is the vision of the FSCC for why managing systemic risks and the pursuit of financial stability matter. Let me wish all the participants an enjoyable 10 hours of learning. Eli has not shared with me the answer key to his questions. But knowing him for so long, I assure our FSCC colleagues that you’re learning from the best in the field. Finally, let me thank those who patiently set up the logistics for getting this course off the ground. To LILY W ONG of ASB, thank you for your patience. To our FSCC Secretariat, I look forward to seeing the fruits of this course in your next Systemic Risk Review. Thank you Governor ZETI, CHARLES, HANS, ELI AND TRIW IT. I welcomed everybody to this FIRST collaboration because I do hope to benefit from all succeeding partnerships between ASB and FSCC. Thank you and good morning to all. 2/2 BIS central bankers' speeches	central bank of the philippines	2,021	12
Welcome message by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), during the BSP webinar on "The age of digital banking", 20 July 2021.	Benjamin E Diokno: The age of digital banking Welcome message by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), during the BSP webinar on "The age of digital banking", 20 July 2021. * * * A pleasant day to everyone! I welcome all of you to this timely and aptly titled webinar “The Age of Digital Banking”. Indeed, all aspects of our lives are advancing at such a rapid pace and I’m proud to say that banking or the broader digital financial industry is easily keeping in step. As such, this event is an excellent opportunity to understand, work together, and see the digital revolution from different lenses. And we are fortunate to have distinguished industry leaders and subject matter experts who will share with us their thoughts on the acceleration of digital financial services. But first, allow me to share with you the country’s digital payments landscape based on the 2019 update and 2020 preview on Philippine digital payments conducted by the Better Than Cash Alliance or “BTCA” in partnership with the BSP. In terms of the total volume of payments in the country, 17 percent was made digitally in the first half of 2020, as compared with 10 percent in 2018. Consumer payments make up 78 percent of the 4.6 billion monthly payments, followed by corporate payments at 21 percent. Consistent with the previous diagnostics, the government continues to lead the way in digitization with some 87 percent or P319 billion equivalent of payments by the government (G2X) already in digital form, up from 64 percent in 2018. The same is followed by payments made by people (P2X) and businesses (B2X) at 35 percent and 15 percent, respectively. It is also noteworthy that the volume of digital merchant payments significantly grew by 66 percent since 2018. Essentially, this increase pushed the strong upward trend in the overall volume of merchant payments driven by electronic fund transfers and the heightened usage of prepaid cards. Fully aware of the potential of the Philippine market, the BSP launched in 2020 the Digital Payments Transformation Roadmap. The roadmap is a blueprint for the development of an efficient, inclusive, safe and secure digital payments ecosystem that supports the diverse needs and capabilities of individuals and firms alike. In this journey, two strategic outcomes are emphasized. First is the goal to convert at least 50 percent of the total volume of retail payments into digital form. And second is the availability of varied innovative and responsive digital financial products and services. In parallel, the roadmap also aims to onboard at least 70 percent of Filipino adults to the financial system through the ownership and use of a transaction account. 1/4 BIS central bankers' speeches Over time, the increased usage of transaction accounts will enable Filipinos to build financial profiles that further unlock access to more complex financial services. According to a World Bank article entitled “Digital Financial Services” published in April 2020, access to affordable financial services is critical for poverty reduction and economic growth. Countries with deeper, more developed financial systems enjoy higher economic growth and larger reductions in poverty and income inequality. Fintech-enabled Digital Financial Services (DFS), have the potential to lower costs, increase speed, security and transparency and allow for more tailored financial services that serve the poor. DFS also enable a fast and secure way for governments to reach vulnerable people with social transfers and other forms of financial assistance, especially during times when transportation and movement around the country are unsafe or restricted. With the issuance of Digital Banking Framework, the Philippines is a step closer to reaching its strategic objective. From our end, the BSP has long recognized the role of digital platforms in affording greater efficiency in the delivery of financial products and services. With the issuance of Digital Banking Framework, the Philippines is a step closer to reaching its strategic objective. From our end, the BSP has long recognized the role of digital platforms in affording greater efficiency in the delivery of financial products and services. We also see the recent issuance of the digital banking framework as an integral building block in promoting an enabling regulatory environment that fosters responsible innovation, promotes cyber resilience and contributes towards advancing the digitalization of the financial sector. It is for this reason that a specific classification for digital banks has been defined. Due to their digital-centric business model, the operation of these banks should be underpinned by sound digital governance, robust, secure and resilient technology infrastructure, and effective data management strategy and practices. This is balanced with the recognition that digital banks are subjected to the same set of risks and threats with elevated risks to IT, cyber security, and AML risks. Therefore, the BSP’s existing standards on corporate governance, risk management, compliance, internal control and audit, and reporting governance, among others, shall apply. This digital banking framework is particularly relevant as billions of people affected by the COVID19 pandemic are driving a “historic and dramatic shift in consumer behavior” – according to the latest research from PricewaterhouseCoopers or PwC. The consulting and accounting firm’s June 2021 Global Consumer Insights Pulse Survey also reported a strong shift to online shopping as people were first confined by lockdowns, and continued to work-from-home. Other significant finding from the report that may change the business models of companies is that consumers do not think they’ll go back to their old ways of shopping once the pandemic is over. In the Philippines, the study conducted by Visa also showed that around 70 percent of Filipinos who used digital payment channels during the lockdown will likely continue to do so. Since the release of the regulatory framework for digital banks in December 2020, a number of 2/4 BIS central bankers' speeches proponents have expressed interest and actual intent to apply for a digital banking license in the country. As of June 2021, the Monetary Board (MB) has approved the applications of four (4) banks. The MB approval refers to the first of the three-stage licensing framework of the BSP on the establishment of banks. On March 25, 2021, the MB approved the first application which is from the Overseas Filipino Bank (OFBank) seeking to convert its banking license from a thrift bank to a digital bank. On June 3, 2021, the MB approved the applications of (1) Tonik Digital Bank, Inc., for conversion of its rural banking license to a digital bank license, and (2) UNObank, Inc. for the establishment of a new digital bank. Then on July 15, 2021, the MB approved the application of Union Digital Bank, a wholly own subsidiary of UBP. With the framework’s promising benefits, we must also be cognizant of its attendant challenges and risks. Data privacy concerns, money laundering, and electronic frauds are among the issues that can undermine the confidence in this policy initiative. We therefore expect that the key stakeholders particularly the financial institutions, to adopt adequate measures and controls to manage such risks. Foremost of which is the conduct of an effective information campaign to ensure that consumers are aware of the risks and how they can perform their transactions securely. Consumers must also be aware of the available mechanisms that can promote consumer protection. On the other end of spectrum, other government agencies are also expected to collaborate and address the digital divide. It entails ensuring access to IT infrastructure by people from all walks of life to achieve inclusivity. With the framework’s promising benefits, we must also be cognizant of its attendant challenges and risks. Data privacy concerns, money laundering, and electronic frauds are among the issues that can undermine the confidence in this policy initiative. We therefore expect that the key stakeholders particularly the financial institutions, to adopt adequate measures and controls to manage such risks. Foremost of which is the conduct of an effective information campaign to ensure that consumers are aware of the risks and how they can perform their transactions securely. Consumers must also be aware of the available mechanisms that can promote consumer protection. On the other end of spectrum, other government agencies are also expected to collaborate and address the digital divide. It entails ensuring access to IT infrastructure by people from all walks of life to achieve 3/4 BIS central bankers' speeches inclusivity. We are living in exciting times and we each have a role to play. Let this initiative be just one of many more opportunities for us to work together to truly provide better ways of serving our constituents whenever they require and wherever they are. Be at the comforts of their homes, in the office, in digital devices, or who knows tomorrow even from outer space! Thank you and a pleasant day to all of you. 4/4 BIS central bankers' speeches	central bank of the philippines	2,021	12
Keynote message by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), during the during the ECCP (European Chamber of Commerce of the Philippines) AI+ Financial Services Future of Fintech, 21 July 2021.	Benjamin E Diokno: Keynote message - ECCP AI+ Financial Services Future of Fintech Keynote message by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), during the during the ECCP (European Chamber of Commerce of the Philippines) AI+ Financial Services Future of Fintech, 21 July 2021. * * * Friends and colleagues from the European Chamber of Commerce of the Philippines and Fairs and More, Inc., esteemed guest speakers, ladies and gentlemen, a pleasant afternoon to all. I’m glad to be a part of the AI+ Forum Series wherein we hope to have more strategic discussions about financial technology and how the financial services industry can leverage on technological advancements such as artificial intelligence, machine learning, and robotics, among others, in designing and providing more customer-centric financial products and services. In just the last ten (10) years, we’ve all witnessed how technology has dramatically advanced and elevated our day-to-day living. From augmented reality games to self-driving cars; from voicecontrolled home devices to life-saving medicines; from office productivity tools to space exploration journeys; the possibilities are indeed limitless. Personally, I was astonished to recently learn about deepfakes. Such advances in artificial intelligence are both exceptional and admittedly, disturbing at the same time. After the initial disbelief and amazement wears off, you soon realize how destructive this technology might be if used for ill purposes. Perhaps this is the reason why there is still some resistance in fully embracing technology when it comes to providing financial services, particularly in banking. Because banking, at its very core, is built on trust between the financial institution and its customers. Trust is not built overnight, but is diligently earned over a period of time. Despite the apprehensions, we cannot fully dismiss the potentials that financial technology has to offer, especially in bridging the financial inclusion gap. What good is it to have the perfect financial system if only a handful in society gets to benefit from it? Thus, we need to set aside our fears and prejudices and transform existing challenges to life-changing opportunities by striking the right balance between innovation and regulation. The BSP has fervently sought to capitalize on such development. Our goal has always been to enable a conducive environment for both incumbent banks and Fintechs to harness their full potential with regard to their journey to innovation. This has also paved the way for greater financial inclusion among Filipinos through the build-up of an inclusive ecosystem, the creation of compelling use cases, and fostering of financial literacy and trust in the financial system through consumer protection. We are confident that digital innovation can co-exist alongside BSP’s key mandates of maintaining monetary, financial stability and the efficiency and safety of payments and settlements systems. Likewise, the BSP will continue to support financial products and services that are suitably designed, priced, and tailored to diverse market segments, including the unbanked and 1/2 BIS central bankers' speeches underserved markets, through pioneering delivery channels. While the BSP will continue to champion initiatives promoting responsible innovation in the delivery of financial products and services, all stakeholders must join the journey of transformation into a digital economy that is robust, secure, and resilient that’s accessible to all. Digital is no longer a matter of convenience, but it has, in fact, become a matter of necessity. And the current pandemic has clearly emphasized the need to democratize access to financial services and address exclusion, benefiting those most hit by the pandemic’s effects to the economy. Ultimately, my hope is that the BSP’s enabling regulatory environment would continue to foster a healthy cooperative competition or “coo-petition” among Fintechs and traditional banks. When the advantages of traditional banks, with their market size and operational scale, are coupled with Fintechs’ organizational agility and technical know-how, the resulting synergies could substantially improve the delivery of financial services to all Filipinos, especially the underserved. Indeed, fintech can be a massive driver of our financial inclusion agenda. And so I hope you have you all here as a partner in this pursuit. Together, let’s bring financial services closer to the Filipino people. Thank you and I hope that all of us remain healthy and well during these trying times. 2/2 BIS central bankers' speeches	central bank of the philippines	2,021	12
Message by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), for the 2021 BSP Outstanding Stakeholders' Appreciation Ceremony, 29 July 2021.	Benjamin E Diokno: 2021 BSP Outstanding Stakeholders' Appreciation Ceremony Message by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), for the 2021 BSP Outstanding Stakeholders' Appreciation Ceremony, 29 July 2021. * * * Ladies and gentlemen, welcome to the 2021 Outstanding BSP Stakeholders Appreciation Ceremony. Our theme, “Pagpupugay at Pagkilala: Sa Gitna ng Hamon ng Pandemya,” sums up what we are about to do today—give due recognition to you, our partners, who have gone beyond the call of duty in the name of service at the height of the global health crisis. It has been more than a year since the pandemic began, and, with cautious optimism, we can say that the worst is over. Though our economy received big blows because of the pandemic, we started to see green shoots of recovery as early as the third quarter of last year. This is because of the whole-ofnation approach that we, which includes each of you, employed. Before the pandemic, we are in what we can call as a position of strength, with ample fiscal and monetary buffer that the country used to respond to the crisis. Amid the pandemic, we in the BSP opened our toolkit. We cut policy rate to a historic low of two percent and reduced the reserve requirement to 12 percent—all these to boost market confidence and free up more funds for lending to businesses and households. Extraordinary times call for extraordinary measures. With legal safeguards in place, we extended lifeline support to the national government in the form of provisional advances worth P540 billion to augment its resources for COVID-related spending. In sum, the BSP injected P2.2 trillion into the financial system, equivalent to 12.3 percent of the country’s gross domestic product for 2020 as of July 21, 2021. At the same time, we implemented various time-bound regulatory relief measures to enable banks and their clients manage the impact of the pandemic on their finances. These measures range from grace periods for loan payments to capping of interest rates on credit card usage, among others. As we gear up toward recovery, we are also building the foundation of the “New Economy” through digitalization and financial inclusion. Why finance digitalization? Financial technology makes transactions easier and faster, which in turn, speeds up income. It also makes financial products and services accessible to a greater number of people, which in turn, enhances financial inclusion. In October last year, the BSP launched the Digital Payments Transformation Roadmap. Our goal is to shift from a cash-heavy to a cash-light society, where at least half of financial transactions are done digitally. By 2023, our other goal is that at least 70 percent of the adult population should have financial accounts. 1/2 BIS central bankers' speeches It is worth noting that in the wake of the pandemic, financial transactions coursed through digital platforms InstaPay and PesoNet rose dramatically by 155.4 percent and 22 percent, respectively, in May 2021 as compared to the same period in 2020. Last year, more than eight million electronic money accounts were created. We expect more as the BSP approves the license applications of incoming industry players. The establishment of digital banks will bring about greater efficiency and extend the reach of financial products and services among the unbanked, including MSMEs. We have also taken steps to allow for more extensive use of QR codes for payments. Last April, we extended the payments use case of the QR Ph to include person-to-merchants or P2M. Compared with using point-of-sales terminals, QR technology presents small merchants with a simpler and more affordable payment facility. The BSP also supports the Philippine ID System or PhilSys because this will address the lack of identity documents which is among the most common barriers to account opening. To help us spread the gospel of financial inclusion and digitalization, we recently partnered with our youth, and hopefully, made enthusiastic ambassadors of them. We held our first-ever BSP Youth Summit last July 9 with the theme, “Ibangon natin ang ekonomiya, i-digital mo na!” More than 38,000 registered for this livestream event, which garnered more than 30,000 views on Facebook as of July 21. Eleven youth organizations signed statements of support for our digitalization and financial inclusion agenda. This makes me hopeful that our youth—like you, our dear stakeholders—are strong partners in bringing our services closer to the Filipino people. As we make our way toward the New Economy, we should be able to transform old ways into sustainable, green ones. So, we start within our own backyard. The BSP launched its internal Sustainable Central Banking program, which fosters environmentally responsible and sustainable policies and work practices within the BSP. We have started instilling environmentally sound habits among ourselves by prohibiting singleuse plastics in our premises. We also issued the Sustainable Finance Framework which forms the first phase of our enabling regulations on sustainability. For all these great initiatives to flourish, we need your support. You have been our partners in statistical undertakings, information requirements, advocacy programs, and various initiatives for many years. You never left us even during the most trying times. Now, we enjoin you to help us prepare for the New Economy by promoting digitalization, financial inclusion, and sustainability. Together, we can B-S-P — Build a Stronger Philippines. Today, we celebrate; and tomorrow, we will do great things again. On behalf of the BSP, let me extend our gratitude to all our outstanding partners who have been our anchors and pillars throughout this journey. Congratulations at mabuhay tayong lahat! 2/2 BIS central bankers' speeches	central bank of the philippines	2,021	12
Speech by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), at the 1st General Membership Meeting of BAIPHIL (Bankers Institute of the Philippines) "BAIPHIL@80: Building Resilience through Strong Governance", 17 August 2021.	Benjamin E Diokno: Strengthening banking sector resilience through good governance Speech by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), at the 1st General Membership Meeting of BAIPHIL (Bankers Institute of the Philippines) “BAIPHIL@80: Building Resilience through Strong Governance”, 17 August 2021. * * * To the officers and members of the Bankers Institute of the Philippines, Inc. (BAIPHIL) under the leadership of BAIPHIL President Romel D. Meniado, colleagues from the banking industry, ladies and gentlemen, good morning! First of all, thank you for inviting the Bangko Sentral ng Pilipinas (BSP) to be part of the 1st General Membership Meeting of BAIPHIL. Good governance has underpinned BAIPHIL’s leadership through the years. It is for this reason that we are celebrating 80 years of excellence in the delivery of your mandate of continuing education, information sharing and research. While the BSP wears many hats, today I will focus on the important role of the BSP as regulator and supervisor in the financial industry. I will begin by sharing some highlights on the macro economy and the banking system, and then move on to the results of the Banking Sector Outlook Survey (BSOS). This will be followed by the KEY strategic supervisory thrusts of the Bangko Sentral which are: (1) strengthening risk governance; (2) promoting responsible and responsive innovation; and (3) advancing the sustainability agenda in the financial system. I will discuss our continuing commitment and support to financial sector reform through the passage of key legislations. I’ll close by stating what we expect from BAIPHIL. Let me begin with good news. Based on the recent Philippine Statistics Authority’s data, the country is officially out of the pandemic-induced recession. The economy grew by 11.8 percent in the second quarter of 2021. Likewise, inflation rate decelerated in July 2021 to 4.0 percent. This is the first time this year that the inflation rate returned within the 2-4 percent target band. As of end-July 2021, the country’s gross international reserves stood at USD106.6 billion. Once again, remittances coming from overseas Filipino workers continues to provide strong support to the economy as money transfers coursed through banks grew by 13.1 percent to USD2.6 billion in June 2021 from a 2.4 billion in May 2021. Meanwhile, unemployment remained unchanged, at 7.7 percent in June 2021. While we have taken a step back because of the recent implementation of ECQ in response to the more transmissible Delta variant, I am confident that we will be able to get back on track with the adoption of a whole-of-nation approach in addressing the challenges brought about by this pandemic. What is key, however, is our vaccination rollout. Let’s now look at the Philippine banking system. Banks’ total resources continued to expand, albeit at a much slower pace relative to pre-pandemic period. Year-on-year growth of banking system assets was posted at 6.4 percent as of end-June 2021. 1/6 BIS central bankers' speeches The expansion was mainly funded through deposit generation. Deposits grew by 7.6 percent year-on-year to P15.3 trillion as of end-June 2021. These deposits were mostly peso-denominated and sourced from domestic households and enterprises. These developments are testament to the public’s continued trust and confidence in the banking system. Gross total loan portfolio (TLP) declined year-on-year by 0.4 percent to P10.8 trillion as of endJune 2021. This is both a supply and demand issue as banks continue to be risk averse while businesses defer their expansion plans given the uncertainty in the economic environment. Nonetheless, banks have continued to restructure and grant new loans to the micro, small and medium enterprises or MSMEs. As of the reserve week ending 29 July 2021, loans to MSMEs that were utilized as alternative compliance with the BSP’s reserve requirements amounted to P188.7 billion, up from the P8.7 billion recorded as of end-April 2020. Overall, loan quality remains manageable. Gross non-performing loan (NPL) ratio rose to 4.5 percent as of end-June 2021, but this was accompanied by a high NPL coverage ratio of 82.4 percent as of the same period. The recent passage of the Financial Institutions Strategic Transfer (FIST) Act provides banks with a stand-by facility to offload their non-performing assets in case these post a sharp increase. Banks remained well-capitalized. As of end-March 2021, the capital adequacy ratios of the universal and commercial bank industry stood at 16.8 percent and 17.4 percent on solo and consolidated bases, respectively, from the previous year’s 15.3 percent and 15.8 percent. Moreover, banks maintained sufficient buffers to meet liquidity and funding requirements. Liquidity of banks was ample as the liquidity coverage ratio (LCR) of the UKB industry reached 198.0 percent as of end-May 2021 on solo basis, almost double the regulatory minimum of 100 percent. Similarly, as of end-May 2021, UKBs’ net stable funding ratio (NSFR) stood at 143.6 percent on solo basis, well-above the BSP regulatory threshold of 100 percent. This indicates availability of more stable funding to serve bank customers in the medium term. For smaller banks, the minimum liquidity ratios (MLRs) of stand-alone thrift banks (TBs), rural and cooperative banks (RCBs) surpassed the 20 percent minimum as of end-March 2021 data. We owe the sustained safety and soundness and continued resilience of the banking system on the reforms implemented both by the BSP and the banking industry over the years. Unsurprisingly, the banking industry’s leaders remain optimistic of banking system prospects in the next two years. Highlights of the results of the Banking Sector Outlook Survey (BSOS) for the First Semester of 2021 reveal the following: First, banks continue to view the Philippine banking system as stable with prospects of double-digit growth in assets, loans, investments, deposits and net income. Second, all banks continue to expect a downgrade in the quality of their loans with a nonperforming loan (NPL) to total loan ratio of above 5 percent. In particular, Universal/Commercial banks (UKBs) estimate their NPL to settle between 3.0 percent and 6.5 percent. More banks also intend to report higher NPL coverage ratio at more than 50.0 2/6 BIS central bankers' speeches percent to 100.0 percent. Third, banks will continue to report tight net interest margin (NIM) at 1.5 percent to 3.0 percent. Respondents expect return on equity of 2.0 percent to 5.0 percent. Fourth, asset quality and credit risk emerged as the top-most risk to the banks’ operations while macroeconomic and operational risks are the risks common to most of the respondent banks. Fifth, there is a distinct shift in organizational focus towards sustainable financing. More respondent banks view such mode of financing as highly important. Finally, banks intend to maintain capital and liquidity buffers at levels higher than domestic and global standards to promote institutional stability. The BSP will continue to push for major reforms to ensure the soundness, stability, resilience and inclusivity of the banking system amid the ongoing health crisis. The BSP’s strategic regulatory and supervisory thrusts focus on three key areas, namely: strengthening risk governance; (2) promoting responsible and responsive innovation; and advancing the sustainability agenda in the financial system. The pandemic triggered a strategic review of business models and business priorities due to the changing business landscape. This highlights the importance of having strong risk governance. The BSP will continue to raise the bar in managing risk to ensure that the financial industry remains resilient to threats to financial stability. In this respect, we expect three things from banks: 1. We expect banks to build buffers and adopt robust stress testing methodologies so that they will be able to timely identify emerging risks, anticipate the occurrence of new risk triggers and prepare for their occurrence. 2. We expect banks to adopt more resilient systems to fend off the increase in cyber threat actors as the industry becomes largely digitalized. 3. Finally, we also expect banks to continuously adhere to the tenets of good governance and protect the interest of the public even with the reduced face to face interaction with their clients. Recent issuances of the Bangko Sentral are all directed toward this end. For instance, the BSP recognizes that building and sustaining a good reputation is a critical element in promoting a bank’s safety and soundness. Since reputational risk is inextricably linked to other risk exposures such as credit, market, liquidity, and operational risks, it can be triggered by any risk such as for instance an unfavorable feedback from a client. Circular No. 1114 or the guidelines on reputational risk management recognizes that everyone in the organization has a role to play in the management of reputational risk. Said guidelines highlight the importance of shared accountability and has set out the roles and responsibilities of the board of directors and officers, consistent with the principle that the tone of good governance should come from the top. In the same vein, the BSP issued Circular No. 1112 requiring banks to observe due diligence in the recruitment of their personnel. The “Know your employee” rule will not only improve the operational risk managements of banks but also foster confidence in the banking system. On another note, I would like to take this opportunity to remind everyone that while the delivery platforms for products and financial services may have changed, the banking industry is exposed 3/6 BIS central bankers' speeches to the same risks credit, liquidity, market, and operational, among others. As such, as we put more resources on information technology systems and infrastructure. An important part of risk governance is having the effective policies, practice, and systems in place to combat money laundering and terrorist and proliferation financing. Please allow me to briefly discuss the Philippine’s recent inclusion the Financial Action Task Force’s grey list. The Financial Action Task Force (FATF) included Philippines in its latest “grey list” of countries, which means that the Philippines will be under increased monitoring as we prove our progress against money-laundering and terrorist financing. If we as a nation fail to institute the recommended measures, this may potentially increase the cost of doing business with Filipinos, as regulators and financial institutions add another layer of scrutiny on our transactions. While we have not yet received any report on changes in the cost of transactions, we continue to engage different stakeholders to inform them of the actions taken by the country to address the remaining issues identified in the Mutual Evaluation Report. Indeed, the Philippines swiftly acted on the concerns raised in the report and took a whole of government approach in addressing the issues. We have completed our key commitments and continue to do so in the midst of our fight against the ill effects of the pandemic. On our part, the BSP remains steadfast and committed to implement initiatives aimed at further strengthening banking system’s framework and defenses against money laundering, terrorist financing and proliferation financing risks. We will continue with our strategic initiatives to promote awareness and enhance the capabilities of our supervised financial institutions against these risks. Moving on, the BSP believes that digitalization and financial inclusion are mutually reinforcing goals. It is in this light that the BSP is espousing an enabling environment to promote responsible and responsive innovation while at the same time ensuring that attendant risks are prudently managed. Promoting the growth of the digital financial ecosystem is a win-win proposition for the industry and the public. On one hand, digitalization will allow financial institutions to broaden their client base, tap other revenue sources, and improve operational efficiency. On the other hand, financial consumers will benefit in terms of convenience in completing transactions, lower costs, and access to specialized financial products and services. These are the main drivers that led to the development of the BSP’s three-year Digital Payments Transformation Roadmap. The Roadmap aims to shift at least 50 percent of total retail payment transactions to digital, and to have 70 percent of adult Filipinos with transaction accounts by year 2023. These goals are anchored on the implementation of key digital rails namely: (i) the Philippine Identification System; (ii) next generation payment system; and (iii) open finance ecosystem. We see open finance as a means to foster digital financial inclusiveness since individual consumers and small businesses would be empowered to choose the financial service provider that could offer products and services suited to their needs at reasonable costs. This is made possible through “permission based” access to consumer data that will enable banks and other financial institutions to develop products and services that address the needs of the customers. In line with the BSP’s thrust to promote effective risk management systems without stifling innovation, the BSP will institutionalize its regulatory sandbox or test and learn approach to provide guidance and encourage FinTech companies to propose solutions that will address gaps 4/6 BIS central bankers' speeches and improve products and services in the digital financial ecosystem. The BSP is also currently working on an issuance which will explicitly set out our expectations on the fraud management systems of our supervised financial institutions. In view of the increasing number and evolving forms of cyberthreat attacks, supervised financial institutions are expected to adopt more robust systems to protect their data and systems and ensure delivery of uninterrupted services. We hope that this issuance will further strengthen industry partnerships and collaboration keeping in mind that the fight against cyberthreats is not a battle faced by one bank alone. It is a battle that should be fought collectively by the entire financial industry. Finally, the BSP recognizes that environment and climate change related risks may translate to financial losses and pose threats to financial stability in the long run. In this regard, the BSP issued the Sustainable Finance Framework under Circular No. 1085 to mainstream the adoption of the sustainability agenda in the financial industry. This will be followed by more granular expectations in managing climate change and other environment-related risks in relation to key financial risks such as credit and operational risks. Our team is already completing the assessment of comments received on the draft guidance and we are targeting to publish the issuance by the fourth quarter of this year. Parallel to this, the BSP, in partnership with the World Wildlife Fund (W W F) Philippines, The World Bank, and industry associations will conduct vulnerability assessments and stress testing exercises with volunteer banks. The BSP will leverage on the results of said exercise in the issuance of supplemental stress testing guidelines, and enhancement to the prudential reportorial requirements. These exercise will enable the BSP to gather more data and information for financial surveillance analysis and policy development. Within the BSP, we have also embraced sustainability principles with the formal launch of our Sustainable Central Banking Program. We have taken significant strides in this space as a recognized champion of the sustainability agenda. First, the BSP has invested USD 550 million in the green bond fund of the Bank for International Settlements. Second, we are conducting a vulnerability assessment of the BSP branches in the region to determine our potential losses in case of severe hazards. Along this line, we launched a design competition for the New BSP Complex to be built in New Clark City. The BSP Complex is envisioned to become a global benchmark for a smart, green, and modern facility that promotes environmental sustainability and efficiency. Finally, we continue to strengthen engagement with varied stakeholders in the domestic and international fronts to intensify our campaign for the adoption of sustainability principles. To further strengthen financial stability, the BSP is supporting key legislations. These include the Deposit Secrecy Bill, Financial Consumer Protection Act, and the Amendments to the Agri-Agra Mandatory Credit Allocation. The BSP is pushing for the Amendment of the Bank Secrecy Laws to ensure the conduct of effective supervision of banks. We believe that BSP should be granted unimpaired access to information on depositors to fulfill its supervision mandate and protect the interests of depositors. 5/6 BIS central bankers' speeches The Financial Consumer Protection Bill will provide a comprehensive financial consumer protection regime that consolidates financial inclusion, financial education, good governance, and effective supervision for the purpose of consumer protection. Meanwhile, the amendments to the Agri-Agra Law recommends a financing approach that considers the requirements of the broader agricultural ecosystem. The proposed amendments to the Law are envisioned to strengthen rural development and improve well-being of agricultural and rural community beneficiaries. In closing, we look forward to BAIPHIL’s utmost support and commitment as we pursue our financial sector stability and resiliency agenda. Aside from further training and conduct of fora, BAIPHIL may consider sponsoring or conducting studies to contribute to the growing literature on the Philippine banking system. We will be happy to be your partner in this endeavor as we also recently created a BSP Research Academy. The BSP looks forward to our continued partnership in retooling, reskilling, and shaping the professional development of our colleagues in the banking industry. I would also like to recognize the officers and committee chairpersons of the BAIPHIL in the past year under the leadership of our very own Assistant Governor Resty Cruz. Under their leadership BAIPHIL remained strong and productive despite the ongoing crisis. Maraming salamat at Mabuhay po tayong lahat! 6/6 BIS central bankers' speeches	central bank of the philippines	2,021	12
Speech by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), at the Annual Conference of the Microfinance Council of the Philippines, 18 August 2021.	Benjamin E Diokno: Emerging from the crisis - challenges and opportunities in the new economy Speech by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), at the Annual Conference of the Microfinance Council of the Philippines, 18 August 2021. * * * To the members of the Microfinance Council of the Philippines led by Mr. Eduardo Jimenez, microfinance champions and advocates, colleagues in government, partners in financial inclusion, guests, ladies and gentlemen: a pleasant afternoon to all. We at the Bangko Sentral ng Pilipinas are always glad to be a part of this annual conference. We look forward to this yearly gathering as it gives us an on-the-ground perspective of current developments and challenges in the microfinance industry. The past few weeks have indeed been eventful. The COVID-19 pandemic rages on. We have been in this battle against the virus for more than a year, with anxieties renewed amid reported cases of the Delta variant. Meanwhile, the recently concluded Tokyo Olympics leaves a mark in history as our weightlifter, Hidilyn Diaz, captured the country’s first ever gold medal while Nesthy Petecio brought home our first medal in women’s boxing. This has indeed been our country’s best Olympic campaign and medal tally to date. The medals and efforts of the whole Philippine contingent have given a ray of hope and inspiration for the Filipino people in these dark times. It is quite fitting that our country’s first gold should come from weightlifting. We can draw parallels from this story of triumph to the important work done by our microfinance institutions. Just as Hidilyn lifted 127 kilograms or about 280 pounds of steel in her winning moment, microfinance institutions are also lifting the weight of over 9 million poor and underserved Filipinos. This is what financial inclusion is all about: lifting each other up. Moreover, Hidilyn’s road to the gold, as we now know, was not an easy one. Along the way, she had doubts and hardships. The future, for a moment, had been uncertain. Yet she never wavered, never gave up. We see the same strong, indomitable Filipino spirit in our microfinance institutions. We heard compelling stories of the sacrifices the microfinance community has made to continue serving the last mile: avoiding layoffs; officers taking voluntary pay cuts; and continuing fieldwork to check on clients despite the current health and safety risks. The microfinance community’s efforts also extended to giving goods to the public and frontliners 1/3 BIS central bankers' speeches and assisting the government in its cash aid distribution programs. Like Hidilyn, who struggled but gave all her strength and lifted the weight over her head for the gold, you refused to lose to this pandemic. Despite incurring substantial loses yourselves, you are coming out stronger, more powerful, and determined than ever. Indeed, microfinance institutions continue to overcome the odds to continue the important work of financial inclusion to empower unserved and underserved Filipinos. We believe you are GIANTS, just like Hidilyn. Time and again, you have propelled financial inclusion in the country among those considered unbankable – women, low-income workers, and rural communities. With over PHP 60 billion loan portfolio, you play a huge role in boosting our microenterprises. Your trust-based, “personal touch” approach have made you the go-to providers of formal credit for the low-income, entrepreneurial poor. Your compassion and clarity of mission to uplift Filipinos at the financial margins do not go unnoticed. Thus, we are working to ensure you have all possible means at your disposal to drive postpandemic recovery, compete on a level playing field with other industry stalwarts, and propel our financial inclusion mission further and higher. The BSP as Chair of the Financial Inclusion Steering Committee continues to explore ways to assist microfinance institutions, as well as facilitate technical assistance and capacity building for digitalization from development partners. Following the proposal for a COVID-19 relief package, we are engaging the Philippine Guarantee Corporation for a dedicated credit guarantee to encourage the extension of wholesale loans by private banks to microfinance institutions at more responsive terms to enable continued service to clients. The microfinance community has also made digitalization a major priority. Based on a rapid survey conducted last year, 96% of microfinance institutions cited digital payments as a primary initiative, followed by 72% citing app or online platform launching. To support you in your respective digitalization efforts, we are actively pushing for a robust digital finance infrastructure. With the Philippine Statistics Authority and National Economic Development Authority accelerating the PhilSys rollout, we can draw in more unbanked Filipinos into the formal financial system. Our microentrepreneurs, nanays, and tatays can approach microfinance institutions to open an account and secure credit with just their PhilID. Onboarding will be more cost-efficient too for our service providers. We are boosting our whole-of-government approach to diversify the broadband market so that Filipinos across the country can have affordable internet connectivity and digital financial services available to them. We have begun with steps to encourage the adoption of satellite broadband. Microfinance institutions can save on IT costs, automate processes, and enhance delivery of financial services in the last mile through this technology. Picture a farmer in the field or a fisherman at sea doing pera padala, paying loans, receiving 2/3 BIS central bankers' speeches payments with his phone through your mobile apps, just as he would use its built-in GPS to check the weather or navigate the seas. The possibilities are endless. Together with industry partners, we launched the QR Ph to standardize and create an interoperable QR system for person-to-person and person-to-merchant fund transfers. In terms of policy, our recently issued open finance framework gives the power of data to the people. Through open finance, players inside and outside of the industry, regardless of size, will have an opportunity to provide more contextualized services for a wider client base. The digital age is here, and so we encourage microfinance institutions to continue their advance towards digital adoption. As more businesses, including microenterprises shift online, it is also fitting that financial service providers do the same. And so, we urge you to capitalize on these developments. Crises also breed opportunities. And there is no time like the present to recalibrate strategies and fortify digital capabilities. The pandemic may seem insurmountable, but giants like you continue to take huge steps with government to ensure no one is left behind. We owe much to the microfinance community. After all, the BSP’s financial inclusion mission started with microfinance, in the belief that the poor can contribute just as much, if not more, to the country’s growth and prosperity. In closing, we must do things with a greater sense of urgency and efficiency. We must aim higher and strive to reach out to more Filipinos. As the Olympic motto goes: Citius (kee-tee-oos), Altius (al-tee-oos), Fortius (for-tee-oos) – Communiter (ko-moo-ni-ter). Faster, higher, stronger – Together. Maraming salamat at mabuhay ang MCPI. Mabuhay ang Pilipinas. 3/3 BIS central bankers' speeches	central bank of the philippines	2,021	12
Opening message by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), for the Bangko Sentral ng Pilipinas and Monetary Authority of Singapore Virtual Signing of the Amendment Agreement Enhancing the Innovation Function Co-operation Agreement, 4 November 2021.	Benjamin E Diokno: Signing of the Amendment Agreement Enhancing the Innovation Function Co-operation Agreement Opening message by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), for the Bangko Sentral ng Pilipinas and Monetary Authority of Singapore Virtual Signing of the Amendment Agreement Enhancing the Innovation Function Cooperation Agreement, 4 November 2021. * * * To the Monetary Authority of Singapore Managing Director Ravi Menon, senior officers of the Monetary Authority of Singapore and the Bangko Sentral ng Pilipinas, ladies and gentlemen, good afternoon. When I took the helm at the BSP, I clearly laid out my priority agenda—that is—to enable universal access to secure, affordable, and convenient digital services to more financial consumers as a way of bringing the central bank closer to the Filipino people. To accomplish this goal, we intensified our efforts to undertake digital transformation on a nationwide scale. We even expanded BSP’s capability by creating an entirely new sector that’s focused on Digital Payments. Gradually, we expanded use of digital payments in the country from only 1% in 2013 to 20% by the end of 2020. This development affirms that we’ve done significant progress in the domestic sphere. Now, we are ready to extend the reach of the enhanced retail payments of the Philippines beyond our borders. A seamless cross-border payment system can facilitate remittances, tourism, trade and investments. All of these activities have fueled our country’s development before the pandemic. And they would also be vital for our post-pandemic recovery. We chose Singapore to take the next step with us given our strong economic and social ties. Other than hosting many Filipino workers, Singapore is one of our top trading and tourism partners. Four years ago, the BSP and the MAS signed the Innovation Function Co-operation Agreement to provide a venue for collaboration in the fintech arena. Today, we are enhancing the agreement to include joint undertakings in payment innovation and formally commence the work on the possible linkage of our fast payment systems, between the Philippines’ InstaPay and Singapore’s PayNow. I’m confident, that this collaboration would further strengthen the ties between our two nations. So, let me take this opportunity to thank the Monetary Authority of Singapore for our continued engagement for the shared vision of an integrated, multilateral, and interoperable cross-border payment system in the ASEAN region. Thank you. 1/1 BIS central bankers' speeches	central bank of the philippines	2,021	12
Speech by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), at the Chinese Filipino Business Club Webinar, 4 November 2021.	Benjamin E Diokno: Getting back on track - economic and financial developments and BSP policy responses Speech by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), at the Chinese Filipino Business Club Webinar, 4 November 2021. * * * President Alejandro Co, officers and members of the Chinese Filipino Business Club, good morning. It is my pleasure to be with you in today’s virtual session. At this juncture, we have regained some relative stability in our macroeconomic and financial situation. While there was a rapid increase in COVID cases in August due to the delta variant, the country managed to successfully reduce this. New confirmed cases stood at 2303 on November 02, a sharp decline from the peak of 26,303 on September 11. This encouraging development comes with the increasing vaccination rate. As of October 31, 8.6 million or 88.1 percent of the target population in the National Capital Region have been fully vaccinated. The government has been scaling up the vaccination program as we receive a steady supply of vaccines from multiple sources. The country was able to secure 195.4 million doses of vaccine in total, receiving 101.5 million doses as of 29 October. This, together with the sustained implementation of targeted fiscal stimulus, should help boost market confidence and recovery of the economy in the coming months. After five consecutive quarters of economic contractions, the Philippine economy grew by 11.8 percent, from a 17.0 percent decline in Q2 2020. Almost all sectors and expenditure segments of the economy bounced back during the quarter. This indicates that the country is learning how to live with the virus by managing risks through the safe reopening of the economy and calibrated reimposition of granular quarantine restrictions when necessary. Liquidity in the financial system remains ample, expanding by 8.2 percent year-on-year in September 2021. This was faster than the 6.9-percent growth recorded in August, and on a month-on-month seasonally-adjusted basis, M3 rose by 1.3 percent. Credit activity also increased 2.7 percent in September 2021 up from 1.3-percent in August. The continued growth in outstanding loans of universal and commercial banks reflects the modest recovery in banks’ overall lending attitudes and improved economic prospects. While the gross NPL ratio of the Philippine banking system (PBS) stood at 4.5 percent in August 2021, higher compared to 2.8 percent a year ago, the uptick was accompanied by loan-loss provisioning with an NPL coverage ratio of 83.5 percent. Meanwhile, the country’s external sector remains manageable. The country’s exports and imports of goods increased by 21.3 percent and 31.6 percent, respectively. 1/4 BIS central bankers' speeches Cash remittances from overseas Filipinos (OFs) are also strengthening, with 5.7 percent growth in January to August 2021, from a 2.6 percent contraction in the same period in 2020. Meanwhile, the BPO sector remained a bright spot despite the disruption to business activities around the world. In the first seven months of 2021, net foreign direct investments increased by 43.1 percent. This is due to positive foreign investor sentiment on the country’s macroeconomic fundamentals and strong growth prospects. The country’s outstanding external debt also remains at a prudent level as its ratio to GDP slightly eased to 26.5 percent in end-June 2021. Notably, a large portion of our external debt has medium- and long-term maturity profile and carry fixed interest rates. These support a manageable debt repayment schedule and foreign borrowings are less susceptible to volatilities in global interest rates or foreign exchange fluctuations. The gross international reserves (GIR), which stood at US$106.6 billion as of September 2021, continue to provide more than adequate external liquidity buffer. The GIR level is equivalent to almost 11 months worth of imports of goods and payments of services and primary income. This far exceeds the 3-month conventional reserve level considered as adequate. Let me now go to the policy responses of the BSP to support the economy during the pandemic. First were measures to boost market confidence on availability of low cost credit resources, such as cuts in the policy rate and the reserve requirement. Second were extraordinary liquidity measures to the National Government to help fund the pandemic-response measures. These include provisional advances to the national government, purchases of government securities in the secondary market, and remittance of advance dividends to the national governments. Third were regulatory and operational relief measures to maintain stability of the financial system and ensure public access to financial services. We counted loans to micro, small, and medium enterprises as compliance to the reserve requirement, increased the single borrower’s limit, and raised the ceiling for real-estate loans. On MSMEs: The BSP recognizes the crucial role of MSMEs in the economy. Let me discuss the regulatory and relief measures that the BSP has implemented to support them. One is allowing the new peso-denominated loans to MSMEs and critically impacted large enterprises that do not belong to a conglomerate as eligible instruments for compliance with the BSP’s reserve requirement. For the week ending 23 September 2021, the banking system allocated an average of P195.9 billion loans for MSMEs as alternative compliance with the reserve requirements. This level is a substantial increase from the P8.7 billion average MSME loans that were reported for the week ending 30 April 2020. The latest level is equivalent to 13.3 percent of the total required reserves, from 0.6 percent on 30 April 2020. 2/4 BIS central bankers' speeches The Monetary Board also approved prudential measures to assist MSMEs. The regulatory capital treatment of MSME exposures was amended to temporarily reduce the risk weights of loans granted to MSMEs. The implementation of the revised risk-based capital framework for banks was also deferred from end-2021 to end-2022 The period of relief on the reporting of past due and non-performing loans of borrowers affected by the pandemic was also extended to 31 December 2021 from the original timeline of 8 March 2021 subject to reporting to the BSP. Now let me go to BSP’s policy rate. Given a manageable inflation path, the BSP has kept the key policy interest rate at 2.0 percent in its recent policy review on 23 September 2021. As of 14 October 2021, the BSP’s policy and liquidity-easing measures have injected an estimated P2.3 trillion (or approximately USD46 billion). This is equivalent to 12.8 percent of the country’s full year nominal GDP for 2020 as of 14 October 2021. The BSP believes that sustained monetary policy support for domestic demand should help the economic recovery gain more traction. Looking ahead, the BSP affirmed its support to the economy for as long as necessary to ensure the country’s strong and sustainable economic recovery. Moving forward, the BSP’s actions and policy thrusts will continue to be anchored on its core mandates of promoting price and financial stability. Towards this end, the BSP will continue to pursue appropriate policy actions responsive to the needs of the time. On monetary policy: the BSP will remain vigilant over the current inflation dynamics to ensure that the monetary policy stance continues to support economic recovery to the extent that the inflation outlook would allow. It will carefully scan the operating environment with a forward-looking perspective to move in a pre-emptive fashion to address any risks to our price stability mandate. On the financial sector: the BSP will intensify its monitoring and surveillance over its supervised institutions to ensure that they remain resilient to emerging risks and continue to be sound, stable, and inclusive, particularly through the pursuit of enhanced digitization. Finally, on the external sector: the BSP will remain supportive of policies that will help strengthen the economy’s resilience to external shocks, including that of maintaining a market-determined exchange rate, keeping a comfortable level of reserves, and keeping the country’s external debt manageable. Considering the recent economic developments and significant improvement in inoculation, we are optimistic that there is sufficient support for the country’s recovery this year and in the near term. Finally, allow me to end my presentation with these key points: The country’s macroeconomic fundamentals remain sound and bright spots suggest recovery is 3/4 BIS central bankers' speeches underway. The latest GDP growth suggests that the economy has started its gradual recovery. The currently high inflation is due to transitory factors. Banks remain sound and while NPL has increased, banks remain highly capitalized. External position is manageable with more than adequate external liquidity buffer and improving overseas Filipino remittances. While economic activity has improved, the overall momentum of the economic recovery remains tentative as the threat of new COVID-19 strains continues. Nevertheless, the sustained implementation of targeted fiscal initiatives as well as the acceleration of the Government’s vaccination program should help boost market confidence and recovery of the economy in the coming months. The BSP believes that sustained monetary policy support for domestic demand should help the economic recovery gain more traction. Looking ahead, the BSP affirmed its support to the economy for as long as necessary to ensure the country’s strong and sustainable economic recovery. The BSP’s actions and policy thrusts will continue to be anchored on its core mandates of promoting price and financial stability. Toward this end, the BSP will continue to pursue appropriate policy actions responsive to the needs of the time. It will also continue undertaking a range of initiatives to create a more sustainable MSME and agriculture financing ecosystem. Thank you. 4/4 BIS central bankers' speeches	central bank of the philippines	2,021	12
Message by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), at the Signing of Memorandum of Agreement for the Mergers, Consolidation, and Acquisition of Banks, 4 November 2021.	12345Ã¿563Ã¿728259 Ã¿Ã¿22 28 Ã¿ 128852Ã¿Ã¿ Ã¿2969Ã¿26546Ã¿Ã¿46 9Ã¿2Ã¿4646Ã¿Ã¿129563Ã¿Ã¿92226Ã¿9 2Ã¿129298Ã¿68!43546Ã¿563Ã¿ "48446Ã¿ #$%&'Ã¿(2)29Ã¿+Ã¿,,.//$0123'Ã¿4646Ã¿Ã¿129563Ã¿Ã¿92226Ã¿9Ã¿2Ã¿129298Ã¿68!43546Ã¿563Ã¿ "48446 Ã¿568 45&$6&7'Ã¿ Ã¿2969Ã¿26546Ã¿Ã¿46 Ã¿ 48464823Ã¿2538Ã¿9Ã¿9Ã¿59629Ã¿526428Ã¿ Ã¿ 54956Ã¿4!4Ã¿Ã¿"46Ã¿ Ã¿ 54956Ã¿882 Ã¿Ã¿65)Ã¿ Ã¿ 54956Ã¿98264Ã¿1Ã¿5!48556Ã¿ 9Ã¿9284326Ã¿563Ã¿:Ã¿7)29Ã¿Ã¿;56Ã¿4298Ã¿563Ã¿!!2528Ã¿!53428Ã¿563Ã¿26!226Ã¿3 9646Ã¿ 9Ã¿48Ã¿<Ã¿!25892Ã¿Ã¿)2Ã¿=4Ã¿5!!Ã¿Ã¿<Ã¿Ã¿59Ã¿2Ã¿5962984Ã¿56Ã¿2Ã¿ Ã¿ Ã¿Ã¿9 563Ã¿ Ã¿9 Ã¿2Ã¿84646Ã¿Ã¿2Ã¿129563Ã¿Ã¿92226Ã¿6Ã¿923928Ã¿9Ã¿!45468Ã¿9 129298Ã¿68!435468Ã¿563Ã¿ "484468Ã¿Ã¿9Ã¿1 8Ã¿Ã¿Ã¿568Ã¿Ã¿Ã¿ :62Ã¿!2886Ã¿5Ã¿=2Ã¿!259623Ã¿9Ã¿2Ã¿646Ã¿56324Ã¿48Ã¿2Ã¿49562Ã¿Ã¿=946Ã¿229Ã¿ 5 422Ã¿5Ã¿6Ã¿5!Ã¿ ; 5Ã¿5!Ã¿48Ã¿Ã¿26892Ã¿5Ã¿=2Ã¿6462Ã¿Ã¿9432Ã¿9Ã¿563Ã¿9286842Ã¿829428Ã¿Ã¿9 852 !3298Ã¿ ; 2Ã¿ Ã¿58Ã¿!6Ã¿53523Ã¿9Ã¿29298Ã¿563Ã¿68!435468Ã¿Ã¿92Ã¿89629Ã¿)5646 4684468Ã¿6323Ã¿6Ã¿3Ã¿296562Ã¿563Ã¿2242Ã¿948Ã¿565226Ã¿96Ã¿5Ã¿2Ã¿16259< 593Ã¿58Ã¿594<Ã¿6329Ã¿2Ã¿!5=Ã¿Ã¿956Ã¿4626428Ã¿9Ã¿29298Ã¿563Ã¿68!435468Ã¿ 129298Ã¿563Ã¿68!435468Ã¿592Ã¿3284623Ã¿Ã¿)946Ã¿5)Ã¿5Ã¿465645!!<Ã¿896Ã¿563Ã¿!288Ã¿952623 4!4462Ã¿)5646Ã¿8<82Ã¿29Ã¿2Ã¿!6Ã¿96Ã¿Ã¿Ã¿ 01Ã¿345Ã¿67839Ã¿345Ã¿ 9Ã¿1Ã¿1731Ã¿34Ã¿345Ã¿0Ã¿71Ã¿71Ã¿71Ã¿Ã¿345Ã¿466158Ã¿ 9 135Ã¿8557Ã¿15135Ã¿678Ã¿3Ã¿5175Ã¿718Ã¿71Ã¿1717Ã¿1355758Ã¿3Ã¿55 71Ã¿18735Ã¿Ã¿Ã¿ !4585Ã¿678Ã¿15Ã¿345Ã¿35134511Ã¿7Ã¿Ã¿"7Ã¿718Ã¿Ã¿ " 9Ã¿35134511 7Ã¿Ã¿65735Ã¿718Ã¿Ã¿ 9Ã¿71Ã¿345Ã¿18731Ã¿7Ã¿Ã¿"7Ã¿718Ã¿ " Ã¿Ã¿Ã¿ #15Ã¿34585Ã¿6789Ã¿718Ã¿71Ã¿345Ã¿1717Ã¿1355758Ã¿3473Ã¿55Ã¿3Ã¿15Ã¿5589 187318Ã¿Ã¿7$8318Ã¿71Ã¿77Ã¿Ã¿1513589Ã¿11Ã¿83755Ã¿1Ã¿Ã¿15 7731Ã¿585589Ã¿75Ã¿Ã¿5371Ã¿6517358Ã¿71Ã¿558Ã¿71Ã¿58331Ã¿Ã¿6783Ã¿5Ã¿7318 34Ã¿345Ã¿ 9Ã¿3Ã¿175Ã¿7Ã¿5Ã¿Ã¿ %558Ã¿71Ã¿187318Ã¿7Ã¿718Ã¿3Ã¿55Ã¿75Ã¿71Ã¿8315Ã¿Ã¿& 34Ã¿5Ã¿7637Ã¿71 5858Ã¿71Ã¿65Ã¿5158Ã¿Ã¿8759Ã¿718Ã¿71Ã¿5'671Ã¿345Ã¿5749Ã¿751Ã¿345Ã¿513 7859Ã¿71Ã¿71Ã¿5Ã¿7588Ã¿3Ã¿15835138Ã¿3473Ã¿Ã¿665Ã¿345Ã¿34Ã¿551Ã¿345Ã¿Ã¿Ã¿ 01Ã¿5513Ã¿(5789Ã¿3455Ã¿75Ã¿71(Ã¿1375Ã¿558Ã¿Ã¿75Ã¿718Ã¿!4585Ã¿15)Ã¿345Ã¿71Ã¿Ã¿345 46615Ã¿08718Ã¿71Ã¿7Ã¿+783Ã¿71Ã¿71Ã¿!83Ã¿Ã¿55Ã¿1Ã¿,---9Ã¿71Ã¿5Ã¿.Ã¿71Ã¿+$375 0Ã¿71Ã¿55Ã¿1Ã¿,--/0Ã¿71Ã¿46615Ã¿17317Ã¿71Ã¿71Ã¿25Ã¿711Ã¿6731Ã¿55Ã¿1 ,-3,Ã¿Ã¿Ã¿ !48Ã¿(579Ã¿71(Ã¿7Ã¿718Ã¿55Ã¿3Ã¿Ã¿.1Ã¿.35Ã¿3839Ã¿,-,39Ã¿%777(73Ã¿"7Ã¿719Ã¿01Ã¿71 "7Ã¿71Ã¿Ã¿!787(Ã¿7371789Ã¿01Ã¿55Ã¿Ã¿58Ã¿718Ã¿71Ã¿71Ã¿ .%Ã¿"7Ã¿71 55Ã¿21Ã¿1Ã¿2839Ã¿Ã¿4Ã¿7Ã¿718Ã¿1Ã¿5Ã¿71Ã¿158Ã¿.5137Ã¿55Ã¿15Ã¿38Ã¿15 175Ã¿83Ã¿46615Ã¿73158Ã¿719Ã¿01Ã¿2Ã¿"7Ã¿71Ã¿Ã¿Ã¿ !45Ã¿ Ã¿478Ã¿86635Ã¿345Ã¿55Ã¿Ã¿7Ã¿7189Ã¿11Ã¿345Ã¿37Ã¿5Ã¿1Ã¿7711Ã¿ 1717Ã¿181Ã¿7Ã¿Ã¿Ã¿ & 34Ã¿345Ã¿811Ã¿Ã¿37(58Ã¿7555139Ã¿5Ã¿7Ã¿3Ã¿583784Ã¿7Ã¿(17Ã¿1Ã¿7715513Ã¿34 Ã¿5Ã¿75158Ã¿1Ã¿5Ã¿3Ã¿835715Ã¿65589Ã¿55Ã¿65881Ã¿359Ã¿71Ã¿73735Ã¿663 731Ã¿Ã¿5831Ã¿Ã¿%2Ã¿7667318Ã¿Ã¿718Ã¿ 01Ã¿819Ã¿345Ã¿ Ã¿Ã¿1315Ã¿3Ã¿685Ã¿58Ã¿78Ã¿5Ã¿78Ã¿655138Ã¿1Ã¿8658( 5843Ã¿3473Ã¿Ã¿345Ã¿635Ã¿345Ã¿8115889Ã¿8373(9Ã¿71Ã¿653351588Ã¿Ã¿345Ã¿46615 711Ã¿8(835 Ã¿Ã¿ &5Ã¿847Ã¿1317(Ã¿635Ã¿558Ã¿71Ã¿187318Ã¿3Ã¿5735Ã¿58513Ã¿718Ã¿3473Ã¿75Ã¿77635 3Ã¿345Ã¿76(Ã¿4711Ã¿1717Ã¿511513Ã¿Ã¿Ã¿ &5Ã¿73Ã¿345Ã¿ Ã¿Ã¿7Ã¿3Ã¿5Ã¿66538Ã¿3473Ã¿3735(Ã¿5153Ã¿345Ã¿*61Ã¿6565Ã¿3473Ã¿5Ã¿7 855Ã¿Ã¿0Ã¿3471Ã¿71Ã¿173735Ã¿55(15Ã¿586185Ã¿Ã¿348Ã¿58315Ã¿5513Ã¿%771Ã¿87773 73Ã¿%747(Ã¿6Ã¿37(1Ã¿74737Ã¿Ã¿Ã¿Ã¿	central bank of the philippines	2,021	12
Speech by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), at the Singapore Fintech Festival, 11 November 2021.	Benjamin E Diokno: Driving inclusion and digital transformation through open finance Speech by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), at the Singapore Fintech Festival, 11 November 2021. * * * A pleasant day to everyone! Thank you for this opportunity to share insights on the role of open finance in driving inclusion, innovation, and customer-centricity. Open finance deserves particular attention among policymakers and the private sector. When developed and implemented in a responsible way, open finance can unlock gateways towards rapid digital transformation and wider financial inclusion. We, at the Bangko Sentral ng Pilipinas, view that the essential features of open finance can foster responsible data-based innovations that can advance financial inclusion through the development of customer-centric financial products and services. The first essential feature of open finance is consent-driven data portability. Under the open finance framework, consumers are recognized as owners of their transaction data, empowering them to grant access and share their data to financial institutions and thirdparty participants of their choice. The second feature is interoperability and collaborative partnerships. Open finance will involve collaboration and data sharing among incumbent financial institutions and new third-party players such as banks, non-bank electronic money issuers and operators of payment systems. The diversity of participants provides alternative sources of consumer data beyond conventional banking transactions such as utility and bills payments, investments, and insurance choices, providing a rich digital footprint of customer behavior and service needs. Lastly, open finance shall result in the development of customer-centric products and services. Gaining access to multiple sources of data covering a wide range of transactions will enable industry players to gain a deeper insight into customer preferences and behavior. This, in turn, will lead to the development of a more diverse, and more responsive suite of financial products that are tailored to the needs and preferences of consumers and businesses, thereby reinforcing financial inclusion. Open finance can be a powerful tool for the BSP to achieve its main strategic objectives under its Digital Payments Transformation Roadmap of transforming 50 percent of the volume of retail payments into digital form and onboarding 70 percent of adult Filipinos in the formal financial system by 2023. As of end-2020, about 20.1 percent of monthly retail payments volume in the Philippines are already in digital form and we are confident of achieving our target to reach 50% by 2023. Building on this progress, the BSP and the payments industry continue to move towards the development of an open finance ecosystem that can support more innovative digital payment solutions in the country. In addition, the innovation brought about by open finance is expected to expand financial inclusion in the Philippines. Through its capability to accumulate and facilitate the sharing of a rich and 1/2 BIS central bankers' speeches diversified set of customer data, open finance can enable the design and delivery of financial products and services that cater to the varying needs and preferences of the unbanked and underserved, including the micro, small and medium enterprises or MSMEs. In the Philippines, MSMEs account for 99.5 percent of businesses and employ about two thirds of the labor force. Through tailor-fit financing solutions, open finance will be able to onboard more MSMEs into the formal financial system and provide them with the access to digital financial services. The improved access to finance by MSMEs can help sustain their economic activities and aid in the digital transformation of their businesses, thereby empowering them to be an integral part of the country’s economic recovery. While open finance holds immense promise, the BSP recognizes that such benefits may only be realized when end-users’ interests are protected through the institutionalization of policies that safeguard data security, confidentiality and integrity. These are all essential in fostering public trust in the financial and payments system and advancing financial inclusion. Hence, the BSP issued guidelines on the Open Finance Framework which sets the governance and standards for the acquisition, use, and sharing of client data. These guidelines emphasize the need to safeguard customers’ interests in establishing an open finance ecosystem by setting forth the regulatory expectations on consumer protection, data privacy and confidentiality, user consent and dispute mechanisms, among others. The BSP is also in the process of developing a policy on data governance and ethical use of data. This policy aims to ensure that financial data and customer information obtained and passing through different digital channels will be handled ethically, and that all participants will be bound by sound data governance principles. These policy initiatives are consistent with the BSP’s approach of creating an enabling policy environment that encourages innovations in support of digital transformation and financial inclusion, while upholding financial stability, data security, confidentiality, and consumer protection. In sum, open finance is another milestone through which we can break down the barriers to financial inclusion. It offers an opportunity to leverage on the digital transformation of the financial system to make productive use of data in order to develop financial products and services that are tailored to the needs of end-users. As we move towards the post-COVID-19 economy, it is important that regulators and the private sector collaborate to utilize innovations like open finance not just to broaden the range of digital financial services and businesses that can be gained from all the available information. Rather, open finance should serve, together with our other digitalization efforts, to improve the welfare of every citizen, especially the poor, the marginalized and the unbanked, as we strive towards a truly inclusive recovery. Thank you and good day! 2/2 BIS central bankers' speeches	central bank of the philippines	2,021	12
Speech by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), at the 29th APPEND (Alliance of Philippine Partners for Enterprise Development) Leadership Conference, 10 November 2021.	Benjamin E Diokno: Supporting the digitalization of microfinance institutions Speech by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), at the 29th APPEND (Alliance of Philippine Partners for Enterprise Development) Leadership Conference, 10 November 2021. * * * Good day to the leaders and client-members of the Alliance of Philippine Partners for Enterprise Development or APPEND, led by President and CEO Virginia Juan and Chairman Angel De Leon, Jr. Greetings as well to the host of the 29th APPEND Leadership Conference, Tulay sa Pag-unlad, Incorporated. Thank you for inviting the Bangko Sentral ng Pilipinas to take part in this important event. We are always delighted to engage with the microfinance community, our chief partners in promoting financial inclusion in the countryside. The microfinance community is no stranger to servant leadership. From officers taking voluntary pay cuts to members distributing relief goods to the needy, your collective response has served as an outstanding example of leadership through crisis. We commend APPEND particularly for its Food Cart for Nanays program, which provides seed capital to poor families affected by the pandemic. This is a worthy undertaking in its aim to help Filipinos regain dignity of work. Our gains in financial inclusion clearly owe much to your dedication to serve the country’s unbanked and the underserved. Microfinance non-governmental organizations or MF-NGOs remain the major sources of formal credit and drivers of account penetration among the rural population and the country’s poorest. Moreover, microfinance institutions or MFIs are helping us propel digitalization, with 96% of MFIs citing digital payments as a primary initiative followed by 72% citing mobile app or online platform launching. We are glad that APPEND has taken the digital leap forward with APPENDPay to help clients and MFIs participate in the digital finance ecosystem. As a registered Operator of Payment System, APPENDPay can serve as a model for digital adoption in the industry. However, we also know these efforts come at a cost. We are thus working to further ensure MFIs are equally placed alongside big industry players and well-positioned to advance financial inclusion beyond the pandemic. Under our Digital Payments Transformation Roadmap, we envision 70% of Filipino adults will own a transaction account and at least 50% of payment transactions will be digital by 2023. We have mobilized various initiatives guided by the DPTR’s vision and objectives and urge MFIs to explore opportunities created by these initiatives. Allow me to share some recent developments. On expanding digital payment rails 1/3 BIS central bankers' speeches We are promoting compelling use cases to show the versatility of a transaction account, which is considered the gateway to financial inclusion. Through an account, MFIs and their clients can pay government fees through EGov Pay, disburse wages, and collect revenues, among other benefits. Simultaneously, we are expanding digital payment rails to make online and mobile transactions more convenient. Together with industry partners, we launched the QR Ph Person-to-Person or P2P payments in 2019, followed by the full launch of Person-to-Merchants, or P2M just this October. P2M payments will help microenterprises boost competitiveness and revenue streams. Vendors with QR code can accept payments from other P2M-participating financial service providers – or FSPs – while customers need not pay fees when availing goods and services. There are currently 12 FSPs and over 20,000 merchants enjoying the benefits of P2M. As part of our regulatory initiatives, we recently issued circulars on Digital Banking and Open Finance. Digital banks – with their deep technology and innovation orientation – can boost dynamism in digital financial services that will benefit the underserved markets. These innovative players can also act as service partners and intermediaries for MFIs. To date, we have already approved six digital banking licenses. Meanwhile, open finance encourages the creation of more contextualized services for a broader market, promoting deeper collaboration and interoperability among various players, including fintechs. On creating a robust digital finance infrastructure Our collaboration with government counterparts to bolster the country’s digital finance infrastructure is aimed at ensuring the reliable delivery of digital financial services and sustainability of related innovations. We continue to support the national ID or PhilSys rollout. We strongly urge MFIs to take full advantage of Philsys to deliver more innovations in microfinance. With the PhilSys, MFIs can reduce onboarding costs. Unlike other IDs, the PhilSys will enable MFIs to authenticate a person’s identity online and real-time, as well as conduct seamless eKYC. The pilot launch of the PhilSys online authentication, e-KYC, and phased onboarding of private sector relying parties are set for next year. The Philippine Statistics Authority has made significant progress in Philsys implementation, with 36 million Filipinos completing registration of their demographic and biometric data. The PhilSys will support the mainstreaming of transaction accounts, particularly the Basic Deposit Account, which is designed to meet the needs of the unbanked. In fact, 5.6 million bank accounts have been opened for unbanked Filipinos from low-income households through a co-location scheme by the PSA and Land Bank of the Philippines. We are also pursuing policy reforms on digital connectivity to accelerate financial inclusion across the country. 2/3 BIS central bankers' speeches We endorsed Executive Order No. 127 signed by President Rodrigo Roa Duterte in March, promoting satellite broadband technologies to advance rural connectivity. We are pleased to share that its Implementing Rules and Regulations are in place and encourage MFIs to harness this policy. Key reforms like EO 127 aim to expand participation in the satellite broadband space — enhancing connectivity and enabling MFIs to deliver digital financial services more efficiently to rural communities. On establishing strong market conduct Advancing digitalization equally entails building public trust and confidence in the digital financial ecosystem. We are thus strengthening our efforts to promote consumer protection and empowerment. We want all Filipinos to be digitally and financially literate, capable of making informed decisions on their financial welfare. To mainstream digital financial services usage among financial consumers, we launched our Digital Literacy Program last year with the “#SafeAtHome with E-payments” and “E-Safety is Everyone’s Responsibility” online campaigns. We continue to hold financial literacy webinars for target segments such as micro, small, and medium enterprises. We also launched BOB, short for BSP Online Buddy. Through BOB, MFI clients have an expedient channel to report their financial consumer concerns. BOB is available via our official website, social media accounts, and text messaging. We are exploring additional features for BOB given the positive feedback we have received. On innovation for good We share APPEND’s belief in strengthening personal ties with the people we serve. Our strategic interventions are intended to bring the BSP closer to the public. Moreover, we are committed to helping our partners and stakeholders, especially MFIs, in their digitalization journey. We continue to engage the donor and development community to encourage provision of technical and financial assistance for the digitalization initiatives of MFIs. May this year’s conference bring fresh insights and renewed zeal to help the poorest and most vulnerable through digital innovations. In closing, allow me to cite a passage from the Book of Philippians that, like Hebrews 13, speaks of dedication and selflessness: “Do nothing out of selfish ambition or vain conceit. Rather, in humility value others above yourselves, not looking to your own interests but each of you to the interests of the others.” May we all continue to embrace our financial inclusion mission. For in doing so, we can bring a message of hope and help others live with dignity and purpose, especially in these trying times. Thank you and stay safe. 3/3 BIS central bankers' speeches	central bank of the philippines	2,021	12
Speech by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), at the 43rd Annual Convention of the Real Estate Brokers Association of the Philippines, 11 November 2021.	Benjamin E Diokno: The role of real estate practitioners in advancing sustainable growth in the new normal Speech by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), at the 43rd Annual Convention of the Real Estate Brokers Association of the Philippines, 11 November 2021. * * * Officials of the Real Estate Brokers Association of the Philippines (REBAP), ladies and gentlemen, a pleasant afternoon to ALL of you. Thank you for inviting me to your 43rd Annual Convention. The theme of the convention, “Spirited REBAP: Thriving and Working Together in Shaping the Future”, reminds us of the need to dream big and to take bold action. Thus, I welcome this opportunity to share the BSP’s thoughts on the critical role of real estate practitioners in advancing our common objective of achieving sustainable growth in the postCOVID-19 economy. I will start by discussing the economic landscape, including developments in the real estate market. This will be followed by highlights on the performance of the Philippine banking system. Next, I will focus my discussion on the BSP’s initiatives relevant to real estate practitioners and share how these initiatives have affected financing to the real estate sector. I will conclude with a few thoughts on how the BSP and the industry can further strengthen our partnership for purposes of supporting the recovery of the Philippine economy. While the real estate industry is not under the direct regulatory purview of the BSP, it is viewed as an important sector in the BSP’s conduct of monetary policy and financial supervision for the following reasons: First, asset prices affect volatility in general price levels and economic output. Also, volatility in asset prices, which could result from undue speculation or bubbles, may give rise to widespread financial instability. In the past, a real estate boom is primarily financed by bank lending. Real estate is a creditintensive good, but one of the most illiquid assets of financial institutions. Moreover, the BSP’s policy actions affect the movements and behavior in the property market. For example, a hike in policy rate lowers the value of asset holdings of individuals and financial institutions and could potentially make credit financing more costly for both buyers and property suppliers. In 2020, like most of the industries, the real estate and construction sectors contracted in Q1 2020 and throughout the pandemic year 2020. In the second quarter of 2021, however, the real estate and construction subsectors have started to recover as restrictions on mobility and economic activity were gradually relaxed. We also saw real estate demand slip due to pandemic-related uncertainties. The capital values for office and residential units in the country’s major commercial and business 1/6 BIS central bankers' speeches districts decreased in 2020 due to lesser demand amid the pandemic. A higher vacancy rate was also recorded during the period due mainly to slowdown in leasing activities, weak demand and a cautious market. Based on the latest Residential Real Estate Price Index, the residential real estate prices of various types of new housing units declined further in Q2 2021. The nationwide house prices contracted by 9.4 percent year-on-year in Q2 2021, from –4.2 percent in Q1 2021 as the pandemic hit demand. However, high base effects may also have contributed to the significant decline during the period as the index peaked in Q2 2020 while posting a 4.8 percent increase quarter-on-quarter. Meanwhile, the national Commercial Property Price Index, which measures the average changes in appraised values of commercial properties, shows a deceleration in growth in the second half of 2020. The BSP anticipates that activity in the real estate market will recover in line with rebound in overall economic growth in 2022. Meanwhile, the Philippine banking system remained on solid footing as shown by continued growth in assets, deposits and capital, as well as positive net profit, stable capital and liquidity buffers, ample loan loss reserves and manageable loan quality. Overall, the banking system’s financial condition remains supportive of the country’s financing needs. At the height of the pandemic in 2020, the BSP implemented liquidity-enhancing measures to support financing requirements of the economy. For instance, the BSP lowered the BSP’s policy rate by 200 basis points. This rate has since been maintained at 2.0 percent, the lowest rate since the beginning of the pandemic. The BSP also reduced reserve requirements of universal banks to 12 percent from 14 percent. This policy stance has contributed to a general decline in lending rates across all loan product categories. For instance, the weighted average interest rate of housing loans dropped to 6.6 percent as of end-June 2021 from 8 percent in end-March 2020. Similarly, the weighted average interest rate of loans to corporations fell to 4.9 percent as of endJune 2021 from 5.9 percent as of end-March 2020. The BSP’s liquidity measures were complemented by a package of prudential reforms that aim to support lending and the grant of financial relief to borrowers. For instance a) The Single Borrower’s Limit of banks or SBL was temporarily increased to 30 percent from 25 percent until end December 2021. The increase aims to promote the flow of liquidity at the wholesale level and ensure sustained credit towards programs and projects that will support economic recovery. b) The BSP allowed new loans or restructured loans to micro-, small and medium enterprises as well as loans to large enterprises that are critically-impacted by the pandemic as alternative compliance with the reserve requirements. This means that banks need not maintain funds in their demand deposit account with the BSP but can tap the same for purposes of lending to eligible enterprises. 2/6 BIS central bankers' speeches c) The BSP also recently issued twin regulations which we expect will further incentivize banks to grant new loans or restructure loan accounts of their borrowers. The first measure clarifies the prudential treatment of restructured loans and will be in effect until end December 2022. The second measure allows banks to add back to their capital, the increase in provisioning requirements applicable to new and restructured loans from 1 January 2022 until 31 December 2023. These temporary relief measures will soften the impact of provisioning requirements on new and restructured loans on capital which will provide banks with room to further tailor loan terms to their client’s requirements. As to the measures that ease prudential requirements applicable to real estate financing – First, the BSP increased the real estate loan limit of universal/commercial banks to 25 percent from 20 percent. Real estate loans that are subject to this limit excludes certain loans such as: 1. Residential real estate loans or loans to individuals for own occupancy since these loans generally exhibit lower risk, and 2. Loans to developers/construction companies to finance the development and/or construction of socialized and low-cost housing units in line with the National Government’s housing program. Second, the BSP revised the methodology for computing a bank’s compliance with the real estate stress test limits by excluding residential real estate loans. Loans to finance public infrastructure are not included in the determination of a bank’s compliance with both of these prudential limits. Banks have responded positively to these measures through sustained financing to the sector. Loans of the Philippine banking system are broad-based, but real estate activities have consistently been the top recipient of bank loans. Banks’ real estate exposures continued to grow amid the pandemic. Real estate exposures of banks are largely composed of real estate loans at 85.4 percent of total real estate exposures. In June 2021, real estate loans grew YoY by 6.1 percent to P2.3 trillion. Banks have also invested in debt and equity securities, the proceeds of which they used to finance real estate activities, although at a smaller magnitude. The ratio of overall non-performing real estate loans to total real estate loans remained at single digit level, indicating that banks have remained prudent in their assessment of real estate loans. The BSP foresees that lending to the sector will remain a priority area for banks for the years ahead. The results of the BSP’s first semester 2021 Banking Outlook Survey, which represent the sentiments of presidents and chief executive officers of banks, show that lending for real estate activities will be among the primary services of corporate and retail segments of banks for the next two years. Financing to the sector will also be supported by firm demand for real estate given the national government’s strategy of establishing safe, resilient and sustainable communities under the Philippine development plan. There is greater urgency to achieve this goal now more than ever due to the propensity of the COVID-19 virus to propagate in densely-populated communities and in areas with poor sanitation and access to water. 3/6 BIS central bankers' speeches Real estate practitioners are also expected to play an important role in upholding the integrity of the financial system. Allow me to spend some time discussing how real estate brokers would be in a strong position to execute Anti-Money Laundering and Counter-Terrorist Financing (AML/CTF) preventive measures given your involvement in the buying and selling of real estate. Criminals typically use real estate for money laundering activities because investment in such is: 1. Reliable, that is, prices are generally stable; 2. Profitable, that is, prices are likely to appreciate over time and the property may be used to generate income; and 3. Functional, that is, the property itself may be used as a home, an office, storage, and such. Moreover, condominiums and other real property have been identified as assets of criminals in majority of fraud, corruption, and illegal drug cases. Let me cite a few examples: Just recently, the Anti-Money Laundering Council (AMLC) filed a petition for civil forfeiture on assets, including a real estate property in Cebu, relative to illegal drugs. As of 2020, real estate with an estimated value of almost P900 million accounted for 22 percent of the total assets subject of civil forfeiture proceedings in the Philippines. The AMLC has been able to confiscate almost P30 million worth of real estate that was “used as a means to hide the proceeds of crime and/or as an instrumentality of crime, including terrorism financing.” Several real estate assets, which are subject of existing freeze orders, have also been found to be related to terrorism financing. Purchasing real property integrates illicit funds into the legal economy. When used for business activities, the purchased real property, such as a hotel or restaurant, may also provide what appears to be a legitimate source of income. Now that real estate brokers are covered under the ambit of the Anti-Money Laundering Act, as amended, real estate brokers are obliged to put into place measures to prevent and detect money laundering and its predicate crimes, terrorism, and terrorism financing. These AML/CTF requirements are not meant to burden real estate brokers but designed to add more credibility, preserve the integrity of the real estate sector, and prevent it from being used as a channel or a repository of criminal proceeds. The actions required of real estate brokers include: 1. Conduct of Customer Due Diligence (CDD)/Know-Your-Customer (KYC) procedures on all clients; 2. Filing of covered transaction reports on single cash transactions in excess of P7.5 million or its equivalent in any currency; and filing of suspicious transaction reports, which are transactions, regardless of the amounts involved, where any of the suspicious circumstances listed in the amla, as amended, exists; and 3. Recordkeeping of all CDD/KYC and transaction records for at least five (5) years. First, it must be noted that real estate brokers are already performing two (2) of these three requirements, that is, CDD/KYC procedures and recordkeeping. Since the purchase of real property from a real estate broker or developer is an official and 4/6 BIS central bankers' speeches contractual undertaking, stating personal information as well as the sources of funds should not be an issue—if the client has nothing illegal to conceal. Further, the client would only have to accomplish and sign a one-time declaration form, which will be stored for a minimum of five (5) years by the real estate broker. Second, it must be emphasized that covered transactions only involve single cash transactions of over P7.5 million. This means that all transactions that are below the threshold or those that are facilitated through banks or in-house financing are not covered transactions. It is also worth mentioning that clients paying real estate brokers and developers in sizeable amounts of cold cash is not conventional in the industry. We all know that housing is a basic Filipino need. The city of the future will go beyond safe and affordable housing but will be characterized by smart planning, climate resilient and energy efficient systems, as well as inclusive and socially uplifting communities. Moving towards this ideal entails the promotion of sustainability practices at the grassroots level which we hope will create a ripple effect in the supply chain. The BSP has started work in this area by launching a design competition for the new BSP complex to be built in New Clark City. The BSP complex is envisioned to become a global benchmark for a smart, green, and modern facility that promotes environmental sustainability, efficiency and employee health and wellness. The BSP has also been a staunch advocate of the mainstreaming of sustainable principles in supervised entities and promotion of sustainable financing. In 2020, the BSP issued the Sustainable Finance Framework which communicated our expectations for banks to integrate sustainability principles in their corporate strategy, operations, governance and risk management systems. This was followed by the detailed guidelines on the management of environmental and social risks in relation to credit and operational risks last month. These regulations have been reinforced at the national level by the development of the Philippine Sustainable Finance Roadmap and the Sustainable Finance Guiding principles by the Green Force. The Green Force is an inter-agency body led by the BSP and the Department of Finance with 16 other government agencies as members. Through these initiatives by the Green Force, the BSP expects further inflows of investments toward green and sustainable projects or activities in the Philippines. All in all, we see a lot of promising developments. Through our efforts, the country’s real estate market can evolve into intelligent, green and sustainable communities all over the Philippines. On the part of the BSP, we will continue our efforts to provide an enabling framework that will help our country achieve balanced and sustainable economic growth and keep our financial system strong. Our combined actions will lead to a greener, better, and sustainable future for our children and the Filipino people. Congratulations and more power to the REBAP! Thank you and mabuhay! 5/6 BIS central bankers' speeches 6/6 BIS central bankers' speeches	central bank of the philippines	2,021	12
Opening remarks by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), at the Virtual Numismatic Event, 11 November 2021.	Benjamin E Diokno: Opening remarks – “Money talks -what every Filipino should know about the history of Philippine money” Opening remarks by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), at the Virtual Numismatic Event, 11 November 2021. * * * To the Philippine Numismatic and Antiquarian Society (PNAS), colleagues from the BSP, learners from state universities and colleges, fellows from knowledge resource networks and museums all over the country, friends from the media, and those who are watching us live from Facebook, good afternoon. I am pleased to welcome you all to “Money Talks: What Every Filipino Should Know about the History of Philippine Money,” the first virtual numismatic event organized by the Bangko Sentral ng Pilipinas in partnership with The Philippine Numismatic and Antiquarian Society. No less than Proclamation No. 1486 Series of 1975 declares November 17–23 of every year as National Numismatic Week and designates PNAS to take charge of this national observance. But for too many of us, the coins and banknotes in our pockets are but a means to an end. We do not bother to look or even appreciate the intricate designs, security features, nor the vital historical moments captured in our money every time we take out our wallets to pay. But money plays an unquantifiable function outside of its textbook definition as a medium of exchange, unit of account, and store of value. Over time, our coins and banknotes have served as a silent witness to history and human development – all the while it has changed hands and enabled transactions on a global scale. From exchanging physical goods through barter to the rise of gold and silver which gave way to paper and the modern-day New Generation Currency, Philippine money has changed form and shape countless times throughout different historical periods. But in each of these transitions, our coins and banknotes never failed to capture and reflect vital historical scenes and figures. Historian Ambeth Ocampo chronicles this storied journey in our coffee table book, YAMAN: History and Heritage in Philippine Money, where he emphasizes, “Filipinos have to be reminded that they carry history in their pockets.” Today, Professor Ambeth will walk us through the history of money and how it plays into our unfolding story as a nation. We will also get to hear from Atty. William Villareal and Director Paul De Jesus of PNAS on numismatic pieces and counter-stamped coins. Lastly, the BSP’s Currency Policy and Integrity Department will share reminders on the proper handling of banknotes and coins. On its part, the BSP has been working closely with partners like PNAS to promote, protect, and preserve the country’s rich numismatic heritage through educational, cultural preservation, information sharing, and collections management initiatives. With more than 10,000 numismatic pieces in our collection that date as far back as the preHispanic area, the BSP Money Museum serves as the main repository of the country’s rich numismatic history and heritage. Built in January 1974 with the Bank’s own currency holdings and donations from various 1/2 BIS central bankers' speeches collectors, the Museum is now nearing 50 years old and chronicles the rich and evolving national story in our banknotes and coins. Before I end, I would like to invite the public to look into commemorative notes and coins for sale at the BSP Store. These commemorative coins are minted in honor of a specific person or historical event – from the anniversaries of our national heroes to Pope John Paul II’s visit to the Philippines. Just a few weeks ago, we released commemorative coins featuring General Emilio Aguinaldo, Teresa Magbanua, and Mariano Ponce. You can check the BSP website or browse through social media channels for available commemorative offerings. In closing, while the BSP is pushing for the transition to a digital-first and cash-lite economy, we will always look to our coins and banknotes as timeless reminders of our past and aspirations as a nation. They will remain curators of our history and custodians of our national identity. For it is only through an understanding of the past that we gain a deeper appreciation of how far we’ve come as a nation and craft a better path ahead. At this juncture, I now turn the floor over to Professor Ambeth. Thank you and I wish everyone an insightful and productive session ahead. 2/2 BIS central bankers' speeches	central bank of the philippines	2,021	12
Welcome remarks by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), at the 6th ASEAN Central Bank Heads of Internal Audit Network Meeting, 16 November 2021.	Benjamin E Diokno: Welcome remarks - 6th ASEAN Central Bank Heads of Internal Audit Network Meeting Welcome remarks by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), at the 6th ASEAN Central Bank Heads of Internal Audit Network Meeting, 16 November 2021. * * * Distinguished heads of internal audit (IA) and delegates of central banks in the ASEAN Region and the Asian Development Bank, esteemed guest speakers, colleagues from the Bangko Sentral ng Pilipinas, ladies and gentlemen, a pleasant day to all. On behalf of the Monetary Board and the Bangko Sentral ng Pilipinas, I welcome you all to the 6th ASEAN Central Bank Heads of Internal Audit Network Meeting, which the BSP is hosting for the first time. It is unfortunate that we could not have hosted this meeting in Manila where we can personally meet and welcome you, but I am sure that this virtual conference will be just as engaging and productive. Behind the theme of this year’s meeting, which is aptly entitled “Internal Audit at the Forefront of Digital Innovation”, is a similar novel concept: Digital Darwinism. It revolves around a simple rule: evolve or risk being irrelevant. In the last decade, we have witnessed how technology has dramatically advanced our day-to-day lives. We have also seen how the financial services industry has evolved to offer more customer-centric financial products, leveraging on emerging technologies, such as artificial intelligence, machine learning, and robotics, among others. The pandemic has further quickened this evolution. If anything, the pandemic has taught us that digitalization is no longer desirable to have, but a must-have. Like other ASEAN nations, the Philippines aims to regain and surpass opportunities lost to the COVID crisis. We want an economy that is stronger and more technologically advanced than ever before. One way of achieving this is through financial digitalization. Going digital, building on it, tailoring it, securing it, and pushing it to new frontiers is imperative if central banks are to be successful in navigating the post-COVID-19 economy. In 2020, the BSP has launched the Digital Payments Transformation Roadmap where we aim to achieve two major goals by 2023: First, that at least half of all financial transactions in the country are done digitally; and second, at least 70 percent of Filipino adults have financial accounts. We believe that financial digitalization accelerates income growth and democratizes access to more affordable financial products and services. We have also embraced digital transformation in our internal strategy, highlighting our commitment to being an agile, resilient, and proactive organization. We envision to be a digitally transformed organization driven by a strong digital leadership, an innovative and collaborative culture, a secure and resilient technology infrastructure, and optimized work processes that support data-driven decisions. While we recognize the promising benefits of digitalization, we are also cognizant of its attendant risks. Thus, we also highlight that these efforts are underpinned by sound digital governance, adequate risk management practices, and robust internal controls. 1/2 BIS central bankers' speeches Given these developments, it is important for the internal audit function to reposition itself as a strategic partner in driving digital value. The independent view of internal audit continues to be crucial, as it plays a valuable role in complementing the first- and second-line functions by providing assurance and advice on governance, risk management, and controls. Digital transformations are journeys without borders and the possibilities for digital innovation are endless. As central banks embrace change through digitalization, internal audit teams must forge the same trail; reassess perspectives; reimagine audit approaches and methodologies; and tap on reliable technologies to add more value and provide assurance to the organization. I hope that this meeting will provide a meaningful platform for discussing internal audit’s rapidly evolving role in these areas. The shared views, practices and experiences during the sessions will certainly enrich our knowledge and inform our individual and collective digital transformation journey. Thank you and I wish you all a meaningful discussion ahead. 2/2 BIS central bankers' speeches	central bank of the philippines	2,021	12
Speech by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), at the Trust Officers Association of the Philippines' General Membership Meeting, 21 November 2021.	Benjamin E Diokno: Trust - living through the pandemic Speech by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), at the Trust Officers Association of the Philippines' General Membership Meeting, 21 November 2021. * * * To the directors, officers, and members of the Trust Officers Association of the Philippines, guests, ladies and gentlemen, good afternoon! I welcome this opportunity to address the membership of the TOAP once again and touch base on developments since I last spoke at your General Membership Meeting in March of this year. It has now been more than 18 months since the pandemic reached Philippine shores, and all of us – regulators, financial institutions, and clients alike – have learned to adapt to new ways of working, doing business, and living. Economic Performance Things are looking up for the Philippine economy. The country has just recorded two consecutive quarters of growth, following up the 12.0 percent expansion registered in the second quarter of 2021 – the highest growth rate recorded since 1988 – with a 7.1 percent expansion in gross domestic product in the third quarter. Indeed, the third quarter growth surpassed expectations, leading to optimism for a more rapid return to pre-pandemic GDP levels. The economy remains on course to meet the government’s full year growth forecast, which is in the range of 4 to 5 percent Inflation The BSP expects inflation to remain manageable. While headline inflation was at 4.8 percent year-on-year in September, it decelerated to 4.6 percent in October due to lower food inflation. While year-to-date average inflation stands at 4.5 percent, above the target range of 2 to 4 percent, the latest outturn is in line with the BSP’s assessment that inflation will return to within the target range before year-end, then decline towards the midpoint over the next two years. This provides the Bangko Sentral with room to maintain its accommodative monetary policy stance and strongly support sustainable economic recovery. Balance of payments The cumulative balance of payments position for 2021 stood at a deficit of US$665 million by end-September, reversing the surplus recorded in the same period last year. This can be largely attributed to the widening deficit in merchandise trade. The national government also saw its net foreign borrowings decrease. Gross International Reserves Despite recording a month-on-month reduction, the country’s Gross International Reserves remained substantial at US$108 billion. This buffer represents 10.8 months’ worth of import cover. It is also equivalent to about 5.4 times the country’s short-term external debt based on residual maturity. Domestic Liquidity 1/6 BIS central bankers' speeches Meanwhile, domestic liquidity is ample. M3 rose by 8.2 percent year-on-year to P14.6 trillion in September 2021. The BSP is paying close attention to the dynamics of liquidity in the financial system with an eye toward supporting demand and economic activity. Remittances Remittances from overseas Filipinos remain a reliable source of support for the economy. After a minimal contraction in 2020, cash remittances have rebounded this year. For the first nine months of the year, OF remittances were 5.6 percent higher than the comparable figure in 2020. Stability of the Banking System The Philippine banking system is strong. Total assets rose to P19.9 trillion as of end-August 2021, and deposits are also on an upward trend, standing at P15.5 trillion. This encourages us to look toward financial intermediation by supervised entities for support for our recovering economy. Banks are well-capitalized. The capital adequacy ratios of the universal and commercial banking industry on solo and consolidated bases improved to 17.0 percent and 17.6 percent, respectively, in the first half of the year. These remain well above the 10.0 percent minimum threshold set by the BSP. Meanwhile, the gross non-performing loan ratio of the system continues to be manageable, standing at 4.5 percent in end-August. The NPL coverage ratio remains high at 83.5 percent, providing confidence in banks’ ability to absorb possible losses. Performance of the Trust Industry The trust industry also continues to grow. After seeing a temporary reduction in the early days of the pandemic, trust assets have rebounded, and have now significantly surpassed pre-pandemic levels. Assets under management recorded a double-digit year-on-year expansion of 18.4 percent, aggregating to P4.8 trillion by end-June 2021. This is equivalent to 24.3 percent of the banking system’s total assets. The related increase in fees and commissions contributed to the sustained profitability of the industry. The net income of trust institutions rose by P1.0 billion or 33.5 percent year-on-year to P3.9 billion. The overall asset mix has been largely unchanged, with funds primarily invested in debt securities, followed by equities and deposits in banks. Nonetheless, we have observed a significant increase in investments in corporate debt and equity securities, which rose year-on-year by 18.8 percent and 39.0 percent, respectively. This is viewed as part of the effort of trust entities to obtain higher yields amid a low interest rate environment. Still, trust assets are highly liquid, with 90.3 percent classified as investments in highly marketable securities and deposits in banks. At the forefront of the trust industry’s growth is the continued surge in participation in unit investment trust funds (UITFs), in terms of both volume and number of participants. 2/6 BIS central bankers' speeches UITF assets grew by 34.1 percent year-on-year to reach P1.3 trillion by end-June 2021. Meanwhile, the number of participants rose by 117.4 percent to almost 1.6 million. The substantial growth in UITFs is a welcome development. The liquidity of UITFs also makes them an appealing investment outlet during these times. The increased online accessibility of UITFs via various digital platforms has certainly contributed to their growth, and we anticipate a continued push in this regard. Policies Under the Trust Business Model Initiative To further the development of the industry, the BSP continues to enhance its regulatory framework for trust entities under the Trust Business Model Initiative. Through the regulatory reforms, which are set to be rolled out in phases, the BSP seeks to emphasize the importance of good governance, effective risk management, and strong consumer protection. The first phase of the Trust Business Model Initiative was rolled out in early 2021, with the amendments to investment management regulations. Circular No. 1109 reduced the minimum amount for opening an investment management account (IMA) and the required investment of each IMA in a commingled account. The lower minimum requirement allows trust entities to tap retail clients seeking returns higher than those of traditional deposit products, thereby increasing the participation of the public in the securities markets. The amendments to the regulations also allow commingled IMAs to invest in a wider range of financial assets. The next phase of the initiative will cover seven areas. Three draft circulars have already been exposed to the trust industry for comments. The first covers the licensing framework for UITFs. The amendments aim to streamline the approval process for UITFs and make it more risk-based. The second provides a common framework for the conduct of accounts review by trust entities. This will help ensure that clients are accorded with the same degree of due diligence regardless of their choice of trustee. The third involves guidelines on the performance measurement of UITFs. This covers the BSP’s expectations on the selection of benchmarks for UITFs, based on the principles of fair representation and full disclosure. These three proposed issuances are now under re-exposure or revision as the BSP considers the comments received. Other policy issuances in the pipeline include comprehensive investment guidelines that will serve as a guidebook on the investment processes for segregated trust accounts, other fiduciary accounts, and investment management accounts. The BSP is also set to amend regulations on onboarding and the client suitability assessment (CSA) process. These amendments will help ensure that onboarding procedures are tailored to clients’ risk profiles regardless of investment mandate. The CSA process will also be expanded to capture the client’s risk tolerance and financial sophistication. Later on, we intend to issue guidance to align the management of UITFs with the International Organization of Securities Commissions’ Principles for the Supervision of Operators of Collective Investment Schemes. 3/6 BIS central bankers' speeches Personal Management Trust regulations will also be amended to clarify supervisory expectations on the process by which trust entities establish the trust purpose and dispositive provisions of such agreements. Policies Under the Trust Business Model Initiative To further the development of the industry, the BSP continues to enhance its regulatory framework for trust entities under the Trust Business Model Initiative. Through the regulatory reforms, which are set to be rolled out in phases, the BSP seeks to emphasize the importance of good governance, effective risk management, and strong consumer protection. The first phase of the Trust Business Model Initiative was rolled out in early 2021, with the amendments to investment management regulations. Circular No. 1109 reduced the minimum amount for opening an investment management account (IMA) and the required investment of each IMA in a commingled account. The lower minimum requirement allows trust entities to tap retail clients seeking returns higher than those of traditional deposit products, thereby increasing the participation of the public in the securities markets. The amendments to the regulations also allow commingled IMAs to invest in a wider range of financial assets. The next phase of the initiative will cover seven areas. Three draft circulars have already been exposed to the trust industry for comments. The first covers the licensing framework for UITFs. The amendments aim to streamline the approval process for UITFs and make it more risk-based. The second provides a common framework for the conduct of accounts review by trust entities. This will help ensure that clients are accorded with the same degree of due diligence regardless of their choice of trustee. The third involves guidelines on the performance measurement of UITFs. This covers the BSP’s expectations on the selection of benchmarks for UITFs, based on the principles of fair representation and full disclosure. These three proposed issuances are now under re-exposure or revision as the BSP considers the comments received. Other policy issuances in the pipeline include comprehensive investment guidelines that will serve as a guidebook on the investment processes for segregated trust accounts, other fiduciary accounts, and investment management accounts. The BSP is also set to amend regulations on onboarding and the client suitability assessment (CSA) process. These amendments will help ensure that onboarding procedures are tailored to clients’ risk profiles regardless of investment mandate. The CSA process will also be expanded to capture the client’s risk tolerance and financial sophistication. Later on, we intend to issue guidance to align the management of UITFs with the International Organization of Securities Commissions’ Principles for the Supervision of Operators of Collective Investment Schemes. Personal Management Trust regulations will also be amended to clarify supervisory expectations on the process by which trust entities establish the trust purpose and dispositive provisions of such agreements. 4/6 BIS central bankers' speeches Broader Regulatory Initiatives On a broader scale, the BSP continues to exert efforts toward the creation of a more responsive and inclusive financial system. Two priority areas in this regard are sustainable finance and digital transformation. In step with the global community, we have increasingly advocated for the wider adoption of sustainable finance in the Philippines. This begins with the integration of sustainability principles into the corporate governance, strategic, and risk management frameworks of our supervised financial institutions. We encourage trust entities to ensure that environmental and social risks are actively considered in your operational risk management systems. The BSP emphasizes the importance of ensuring that funds classified as sustainable are supported by duly differentiated investment strategies. At the minimum, there must be sufficient evaluation of the issuers’ sustainability-related commitments and the sustainable impact of their products. Disclosures regarding sustainable funds should be useful to the decision-making of participants. The objective of investor protection is paramount in this area. Meanwhile, digital transformation is essential in bringing the financial system closer to the people. Last year, the BSP issued the Digital Payments Transformation Roadmap for the period 2020 to 2023. The aim is to move toward a cash-lite economy, in which at least 50 percent of the total volume of retail payments is in digital form. The Roadmap likewise involves the onboarding to the formal financial system of at least 70 percent of Filipino adults. This will be done through payment or transaction accounts using digital services. Relatedly, the BSP has issued the Open Finance Framework, which will provide financial institutions and third parties with “permission-based” access to customer information. This is seen to aid in the development of innovative financial products and services suited to the changing needs of Filipino consumers. Increased digitalization of financial transactions can be supported by the wider implementation of the Philippine Identification System, or PhilSys, which can create a unique, verifiable and biometric-based digital identity for every Filipino. The operationalization of the PhilSys electronic Know Your Customer and authentication facility will facilitate the digital onboarding of clients. This transformation is not limited to payment products and services, but also applies to investments and other financial transactions. Indeed, the exponential leap in the number of UITF participants can be largely traced to new investors using digital platforms. The BSP calls on supervised financial institutions to take steps to meet this demand. As technology has advanced, the digital transformation of trust entities’ systems, processes and services has become ever more vital to success. As always, the BSP reminds financial institutions to exercise caution and ensure that your risk management systems and controls remain well-suited to your evolving operations. Industry Initiatives The BSP recognizes the efforts of the TOAP toward the sustainable development of the trust industry. 5/6 BIS central bankers' speeches In particular, we commend the industry for its continuing efforts to implement and enhance the UITF Certification Program or the UCP for UITF marketing personnel. As the certification requirement will be fully implemented by 2023, we enjoin the TOAP to work with its member-institutions to ensure that UITF marketing personnel are able to successfully complete the Program. The BSP views this as a crucial initiative in ascertaining that that these personnel can provide adequate information on UITFs and promote the safe and effective delivery of financial services to clients. We likewise appreciate our collaboration with the TOAP as we work to expand the PERA ecosystem. The initiative to solicit suggestions from member-institutions is welcome, as there is still a long way for PERA to go to reach its full potential. Trust entities are valued stakeholders in this initiative. We strongly encourage TOAP memberinstitutions to develop new products to serve this worthy endeavor. We also look forward to continuing cooperation on PERA information campaigns. In closing, the COVID-19 pandemic has changed the way we live, and we find ourselves in a new economy. This reality brings with it a set of challenges, but also new opportunities. One’s ability to thrive depends on how one chooses to act. This situation calls to mind a Chinese proverb, which goes: quote “A wise man adapts himself to circumstances as water shapes itself to the vessel that contains it.“ end quote In a time when the environment is constantly changing, adaptability is undoubtedly the key to success. The BSP strongly encourages the TOAP’s efforts toward the improvement of the skills of trust professionals and the enhancement of systems that will allow member-institutions to be more responsive to the needs of the investing public. Rest assured that the BSP will continue to collaborate with you on creating an environment conducive to financial growth and innovation, toward our common goal of deeper and more inclusive Philippine financial markets. I wish you all a productive two-day TOAP Summit. Thank you. Mabuhay tayong lahat! 6/6 BIS central bankers' speeches	central bank of the philippines	2,021	12
Speech by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), at the TransUnion and FinTech Alliance Webinar, 6 December 2021.	Benjamin E Diokno: Data-driven road to digital financial inclusion Speech by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), at the TransUnion and FinTech Alliance Webinar, 6 December 2021. * * * Members of the Fintech Alliance of the Philippines headed by Chairman Lito Villanueva, TransUnion Chief Revenue Officer Jay Tirona, fellow public servants, financial Inclusion partners, and fintech innovators, good afternoon. It is my pleasure to welcome participants to this webinar as we continue to discuss valuable insights and best practices in financial inclusion. The fintech industry is a pioneer in using data-driven strategies that give rise to innovations and enhancements meaningful to the users of financial services – offering accessibility to financial channels, creating user-friendly platforms, and providing reasonable costs, to diverse market segments. Financial regulators likewise utilize data in formulating supervisory and regulatory policies that are responsive to the needs of financial consumers and address the evolving complexities of financial products. For the BSP in particular, the pandemic has strengthened our resolve to promote broad and convenient access to welfare-enhancing financial services for all Filipinos. A lot of work still lies ahead, but the momentum to achieve these goals is now stronger than ever. The BSP is ready to carry the work forward through 2021 and beyond. Financial inclusion is multidimensional, but at its most basic level, it starts with account ownership. Transaction accounts like bank accounts and e-money wallets enable individuals and households to save money; make day-to-day payment transactions; send or receive remittances; and receive salary, benefits, or financial assistance from the government. In this regard, the BSP with its Digital Payments Transformation Roadmap aims to onboard 70% of Filipino adults to the formal financial system through a transaction account by 2023. It is important to recognize however that rather than being an end in itself, financial inclusion is a means to achieve broader aspirations. The regular and continuing use of an account in particular, allows individuals and small businesses to build a rich digital footprint that can unlock access to a wider range of welfare-enhancing financial services. Today, digital technologies provide an opportunity to accelerate financial inclusion. It facilitates efficiencies that make it possible for financial service providers to serve the unbanked and underbanked. Mobile phone and internet usage in the Philippines in fact show that there is significant opportunity to expand the delivery of basic financial services through digital channels. This is especially true considering that 7 in 10 unbanked adults have a mobile phone. Looking at usage trends, 53% of adults use the internet and they use it extensively. On average, people spend 11 hours per day on the internet with 4 hours spent on social media. However, only 9% use the internet for financial transactions. In addition, 69% of adults have mobile phones. Three-fourths of these mobile phone owners own a smartphone. However, only 12% use their phones for financial transactions. While the trends show low adoption of digital finance, its potential can be realized by addressing two key issues: digital literacy and connectivity. Promoting digital literacy increases awareness 1/3 BIS central bankers' speeches and trust in online financial transactions. Internet connectivity is a necessity to access digital products and services. If left unaddressed, literacy and connectivity challenges can lead to new forms of exclusion and greater digital divide. Deliberate efforts to narrow the digital divide on the other hand can increase the reach of financial service providers. The Philippine Identification System (PhilSys) is a game changing reform for accelerated financial inclusion and innovation. As a digital identity system, PhilSys can facilitate seamless financial transactions, particularly account onboarding and user-permissioned data sharing. The BSP is actively supporting PhilSys implementation not only in the production of the PhilID cards but also in the development of high-impact PhilSys use cases in the government and financial sector. The Philippine Statistics Authority (PSA) has done commendable progress as lead implementing agency with 44 million Filipinos completing the biometric and demographic registration, and 3.5 million PhilID cards delivered to date. As we move towards the fourth industrial revolution, data has truly become the new oil and is now the most valuable resource. However, like oil, raw data in and of itself has little value until it is refined and used intentionally. For the financial industry, data is critical because it helps ensure that products and services are appropriately designed and responsive to the varied needs of individuals. To this end, the BSP undertakes initiatives to increase the availability of consumer data. One of which is the implementation of the Open Finance Framework. The framework adopts the principles of consent-driven data portability, interoperability, and collaborative partnerships among incumbent financial institutions and new third-party players. Through open finance, financial institutions will be able to develop a better understanding of customers’ needs and expand market reach. The BSP is set to complete this year the establishment of the Open Finance Oversight Committee, an industry-led self-governing body tasked to formalize selfgovernance structure where industry standards and inter-participant business rules are housed. Another initiative is the development of a centralized database that can be used for risk-based lending to small and medium enterprise (SMEs). The BSP in partnership with the Japan International Cooperation Agency – or JICA – is now building a credit risk database that consolidates financial data from different banks to generate a robust credit scoring model designed for SMEs. The scoring model is intended to enable lenders to accurately assess SME borrowers without relying heavily on collateral. To enrich the knowledge base of the BSP and the financial industry as a whole, the BSP collects data through various surveys. A recent survey that BSP launched in collaboration with the Asian Development Bank is the gender-focused demand-side survey of microenterprises and SMEs (MSMEs). We expect the survey to provide us with a better understanding of MSME access to finance and support evidence-based policymaking. To appreciate the value of data for financial inclusion, we may look at alternative data for credit scoring as a promising use case. One challenge in securing credit is that forecasting creditworthiness traditionally involves analysis of the historical credit exposure of a borrower. However, many Filipino adults and MSMEs do not have or have very little credit history. The use of alternative data in credit scoring is an innovation that addresses the challenge of predicting the creditworthiness of the so called credit invisible. Unlike traditional data which is composed of bank transactional data and credit bureau information, alternative data come in many forms. This includes social media, mobile data, 2/3 BIS central bankers' speeches utilities data, behavioral data, online transactions, geolocation data, and browser data, among others. With alternative data, a more complete picture of the client is painted thus allowing for more individuals and businesses to be assessed. To understand the extent of usage of alternative data in the Philippines, the BSP conducted a rapid survey in September 2021. Through the rapid survey, we were able to affirm that adopters of alternative credit scoring realize tangible benefits. The number one benefit realized by adopters is improved customer profiling followed by improved pricing of loan products and improved competitiveness in the marketplace. The use of alternative data for credit scoring is just one example of how data can be used to benefit consumers. Looking ahead, we must continue to take initiative in fostering an inclusive digital financial ecosystem. To build trust and awareness in digital finance, we need to support financial literacy programs for individuals and MSMEs. It is therefore important to provide education that will generate familiarity to the available services, minimize vulnerability to scams and usage errors, and ensure a positive customer experience. Lastly, we need to advocate for crucial legislation for internet connectivity, digital payments, and consumer protection. The digital divide, as observed in the lack of internet connection of those in the lower income classes and those in the rural areas, bring to the fore the need to continue seeking ways to make internet connection more accessible. In this regard, the BSP actively supported Executive Order 127 on “Expanding the Provision of Internet Services through Inclusive Access to Satellite Services.” To promote the universal use of safe and efficient digital payments, the BSP is actively supporting Senate Bill 1764 or the Use of Digital Payments Act. Through this act, government entities are directed to use digital payments both in collections and disbursements, including account-based distribution of government financial assistance or ayuda. It also supports merchant acceptance of digital payments by directing local government units to adopt incentive frameworks that encourage the use of digital payments. Consumer protection is another area that needs to be prioritized as the unbanked are the most vulnerable to the new threats that digitalization brings. The BSP actively supports the passage of the Financial Consumer Protection Bill which aims to strengthen the rules and regulations protecting financial consumers. In closing, the shift to digital transactions due to the pandemic has presented us an opportunity to extend the reach of financial products and services to the unbanked and underbanked. We must therefore continue working together to take advantage of this opportunity. I am therefore very much eager to see the innovations and collaboration that may emerge from the discussions today. Thank you and good afternoon to everyone! 3/3 BIS central bankers' speeches	central bank of the philippines	2,021	12
Welcome remarks by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), for the 6th ASEAN Central Bank Heads of Internal Audit Network Meeting "Internal Audit at the Forefront of Digital Innovation", 16 November 2021.	Benjamin E Diokno: Internal audit at the forefront of digital innovation Welcome remarks by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), for the 6th ASEAN Central Bank Heads of Internal Audit Network Meeting “Internal Audit at the Forefront of Digital Innovation”, 16 November 2021. * * * Distinguished heads of internal audit (IA) and delegates of central banks in the ASEAN Region and the Asian Development Bank, esteemed guest speakers, colleagues from the Bangko Sentral ng Pilipinas, ladies and gentlemen, a pleasant day to all. On behalf of the Monetary Board and the Bangko Sentral ng Pilipinas, I welcome you all to the 6th ASEAN Central Bank Heads of Internal Audit Network Meeting, which the BSP is hosting for the first time. It is unfortunate that we could not have hosted this meeting in Manila where we can personally meet and welcome you, but I am sure that this virtual conference will be just as engaging and productive. Behind the theme of this year’s meeting, which is aptly entitled “Internal Audit at the Forefront of Digital Innovation”, is a similar novel concept: Digital Darwinism. It revolves around a simple rule: evolve or risk being irrelevant. In the last decade, we have witnessed how technology has dramatically advanced our day-to-day lives. We have also seen how the financial services industry has evolved to offer more customer-centric financial products, leveraging on emerging technologies, such as artificial intelligence, machine learning, and robotics, among others. The pandemic has further quickened this evolution. If anything, the pandemic has taught us that digitalization is no longer desirable to have, but a must-have. Like other ASEAN nations, the Philippines aims to regain and surpass opportunities lost to the COVID crisis. We want an economy that is stronger and more technologically advanced than ever before. One way of achieving this is through financial digitalization. Going digital, building on it, tailoring it, securing it, and pushing it to new frontiers is imperative if central banks are to be successful in navigating the post-COVID-19 economy. In 2020, the BSP has launched the Digital Payments Transformation Roadmap where we aim to achieve two major goals by 2023: First, that at least half of all financial transactions in the country are done digitally; and second, at least 70 percent of Filipino adults have financial accounts. We believe that financial digitalization accelerates income growth and democratizes access to more affordable financial products and services. We have also embraced digital transformation in our internal strategy, highlighting our commitment to being an agile, resilient, and proactive organization. We envision to be a digitally transformed organization driven by a strong digital leadership, an innovative and collaborative culture, a secure and resilient technology infrastructure, and optimized work processes that support data-driven decisions. While we recognize the promising benefits of digitalization, we are also cognizant of its attendant risks. Thus, we also highlight that these efforts are underpinned by sound digital governance, adequate risk management practices, and robust internal controls. 1/2 BIS central bankers' speeches Given these developments, it is important for the internal audit function to reposition itself as a strategic partner in driving digital value. The independent view of internal audit continues to be crucial, as it plays a valuable role in complementing the first- and second-line functions by providing assurance and advice on governance, risk management, and controls. Digital transformations are journeys without borders and the possibilities for digital innovation are endless. As central banks embrace change through digitalization, internal audit teams must forge the same trail; reassess perspectives; reimagine audit approaches and methodologies; and tap on reliable technologies to add more value and provide assurance to the organization. I hope that this meeting will provide a meaningful platform for discussing internal audit’s rapidly evolving role in these areas. The shared views, practices and experiences during the sessions will certainly enrich our knowledge and inform our individual and collective digital transformation journey. Thank you and I wish you all a meaningful discussion ahead. 2/2 BIS central bankers' speeches	central bank of the philippines	2,021	12
Message by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), for the 2021 Annual Anti-Money Laundering/Counter Terrorism Financing Summit, hosted by the Anti-Money Laundering Council and Fintelekt, virtual, 21 November 2021.	Benjamin E Diokno: 2021 Annual Anti-Money Laundering/Counter Terrorism Financing Summit Message by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), for the 2021 Annual Anti-Money Laundering/Counter Terrorism Financing Summit, hosted by the Anti-Money Laundering Council and Fintelekt, virtual, 21 November 2021. * * * Welcome to the virtual 2021 Annual Anti-Money Laundering/Counter-Terrorism Financing(AML/CTF) Summit, hosted by the Anti-Money Laundering Council and Fintelekt. It is a pleasure to come together with you as we carry on with the crucial task of fighting and preventing money laundering and terrorism financing. In 2017, the AMLC approved the Second National Risk Assessment – or NRA – Report, covering the years 2015 and 2016, to reinforce the Philippines’ AML/CTF regime. The Second NRA found that the level of national money laundering threat is high, arising from the predicate crimes of drug trafficking; graft and corruption; fraud; tax crimes; smuggling; Intellectual Property Law violations; illegal manufacture and possession of firearms, ammunition, and explosives; and environmental crimes. Banks and money service businesses were identified to be the sectors primarily and widely used by criminals to launder the proceeds of crimes. The level of national money laundering vulnerability, on the other hand, is medium. Casinos have high vulnerability, while money service businesses and pawnshops have mediumhigh vulnerability. The rest of the sector is medium. However, terrorism threat in the Philippines is high. Likewise, terrorism financing vulnerability and terrorism financing threat are both high as such organizations appear to have a systematic and established method of raising funds for their operations. Based on the overall evaluation of factors, the national money laundering and terrorism financing threat is high; while the national money laundering and terrorism financing vulnerability is medium. Thus, the level of money laundering and terrorism financing risk is medium-high. This assessment is definitely a cause for concern, but the AMLC has bolstered and implemented risk-mitigation AML/CTF strategies and initiatives, even in the face of the pandemic. The AMLC continues to protect the integrity of the Philippine financial system pursuant to the Anti-Money Laundering Act of 2001, as amended; the Terrorism Financing Prevention and Suppression Act of 2012; and, just recently, the Anti-Terrorism Act of 2012. Allow me to go over some ongoing initiatives and projects by the AMLC and our partners from the public and private sectors. First. The AMLC is closely coordinating with law enforcers, such as the National Bureau of Investigation and the Philippine National Police, as they are the primary investigators for predicate crimes. For the first eight months of 2021, the AMLC has filed a total of 85 cases, varying from civil and criminal cases and involving over PhP1.31 billion and other assets. Further, the implementation of the National Anti-Money Laundering and Countering the Financing of Terrorism Strategy for 2018 to 2022—or NACS—continues to progress. The NACS is aimed at coordinating efforts of relevant agencies in combating money laundering and terrorism 1/3 BIS central bankers' speeches financing. The NACS has also integrated the International Co-Operation Review Group (ICRG) Action Plan to ensure a whole-of-nation approach in addressing our country’s shortcomings in its AML/CTF system. Second. The AMLC is sharing its studies with law enforcement agencies and partner covered persons to increase awareness of money laundering and terrorism financing typologies and red flags. These risk assessments, strategic studies, and typologies include the following: 1. First, Terrorism and Terrorism Financing Risk Assessment, which is an update of the Second National Risk Assessment, particularly on the understanding and assessment of terrorism and terrorism financing risks; 2. Second, Foreign Terrorist Fighters Study using Suspicious Transaction Reports; 3. Third, Money Service Business: 2021 Money Laundering and Terrorism Financing Sector Risk Assessment, which indicates how certain services and products of MSBs are exploited by criminals to facilitate and expand illegal activities; 4. Fourth, Real Estate Sector: A Money Laundering/Terrorism Financing/Proliferation Financing Assessment, which examines the potential criminal threat environment and vulnerabilities associated with the real estate sector; 5. Fifth, An Assessment of the Philippines’ Exposure to External and Internal Threats Based on Suspicious Transaction Reports for 2018 to 2020, which looks into the country’s risk and exposure to money laundering, terrorism financing, and different predicate offenses by gathering information on the generation, movement, and behavior of illicit funds and by evaluating the threats originating within and outside the country’s jurisdiction; 6. Sixth, An Analysis of Suspicious Transaction Reports with Possible Links to Tax Crimes, which is a study on the potential exposure of the Philippines to tax crimes prior to the inclusion of tax evasion as a predicate offense to money laundering by focusing on selected suspicious transaction reports; and 7. Lastly, Suspicious Transaction Report Quality Review: 2017 to 2020 Data Discovery that covers 2.4 million STRs, which the AMLC received from 2017 to 2020 from covered persons and that aims to provide a trend analysis for the covered periods; assess the technical compliance and investigative value of the STRs; and identify the reporting gaps and challenges of covered persons to provide guidance on how to improve the quality of STRs. Most of these reports are available on the AMLC’s website for the guidance of our stakeholders. The AMLC has also issued several amendments to AML/CTF regulations this year to strengthen the Philippines’ AML/CTF supervisory framework. With a more robust framework in place, improvements in AML/CTF operations are expected, demonstrating the Philippines’ progress toward a more effective AML/CTF regime. By now, we understand that the country’s exit from the list of Jurisdictions under Increased Monitoring or the grey list requires commitment and cooperation among the public and private sectors in addressing all 18 ICRG action plan items. Beyond mere compliance, we must grasp that this about fundamentally strengthening our AML/CTF system that would prove beneficial even beyond our lifetimes. And it is through these kinds of conferences, where we are able to synergize various 2/3 BIS central bankers' speeches perspectives and, ultimately, regroup and rethink our strategies in beating the money launderers, terrorists and their financiers, and other criminals at their own game. The AMLC extends its deepest gratitude for your relentless commitment and energy to combat money laundering and terrorism financing and preserve the integrity of the financial system. Thank you. 3/3 BIS central bankers' speeches	central bank of the philippines	2,021	12
Speech by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), at the Trust Officers Association of the Philippines' General Membership Meeting, 21 November 2021.	Benjamin E Diokno: Trust - living through the pandemic Speech by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), at the Trust Officers Association of the Philippines' General Membership Meeting, 21 November 2021. * * * To the directors, officers, and members of the Trust Officers Association of the Philippines, guests, ladies and gentlemen, good afternoon! I welcome this opportunity to address the membership of the TOAP once again and touch base on developments since I last spoke at your General Membership Meeting in March of this year. It has now been more than 18 months since the pandemic reached Philippine shores, and all of us – regulators, financial institutions, and clients alike – have learned to adapt to new ways of working, doing business, and living. Economic Performance Things are looking up for the Philippine economy. The country has just recorded two consecutive quarters of growth, following up the 12.0 percent expansion registered in the second quarter of 2021 – the highest growth rate recorded since 1988 – with a 7.1 percent expansion in gross domestic product in the third quarter. Indeed, the third quarter growth surpassed expectations, leading to optimism for a more rapid return to pre-pandemic GDP levels. The economy remains on course to meet the government’s full year growth forecast, which is in the range of 4 to 5 percent Inflation The BSP expects inflation to remain manageable. While headline inflation was at 4.8 percent year-on-year in September, it decelerated to 4.6 percent in October due to lower food inflation. While year-to-date average inflation stands at 4.5 percent, above the target range of 2 to 4 percent, the latest outturn is in line with the BSP’s assessment that inflation will return to within the target range before year-end, then decline towards the midpoint over the next two years. This provides the Bangko Sentral with room to maintain its accommodative monetary policy stance and strongly support sustainable economic recovery. Balance of payments The cumulative balance of payments position for 2021 stood at a deficit of US$665 million by end-September, reversing the surplus recorded in the same period last year. This can be largely attributed to the widening deficit in merchandise trade. The national government also saw its net foreign borrowings decrease. Gross International Reserves Despite recording a month-on-month reduction, the country’s Gross International Reserves remained substantial at US$108 billion. This buffer represents 10.8 months’ worth of import cover. It is also equivalent to about 5.4 times the country’s short-term external debt based on residual maturity. Domestic Liquidity 1/5 BIS central bankers' speeches Meanwhile, domestic liquidity is ample. M3 rose by 8.2 percent year-on-year to P14.6 trillion in September 2021. The BSP is paying close attention to the dynamics of liquidity in the financial system with an eye toward supporting demand and economic activity. Remittances Remittances from overseas Filipinos remain a reliable source of support for the economy. After a minimal contraction in 2020, cash remittances have rebounded this year. For the first nine months of the year, OF remittances were 5.6 percent higher than the comparable figure in 2020. Stability of the Banking System The Philippine banking system is strong. Total assets rose to P19.9 trillion as of end-August 2021, and deposits are also on an upward trend, standing at P15.5 trillion. This encourages us to look toward financial intermediation by supervised entities for support for our recovering economy. Banks are well-capitalized. The capital adequacy ratios of the universal and commercial banking industry on solo and consolidated bases improved to 17.0 percent and 17.6 percent, respectively, in the first half of the year. These remain well above the 10.0 percent minimum threshold set by the BSP. Meanwhile, the gross non-performing loan ratio of the system continues to be manageable, standing at 4.5 percent in end-August. The NPL coverage ratio remains high at 83.5 percent, providing confidence in banks’ ability to absorb possible losses. Performance of the Trust Industry The trust industry also continues to grow. After seeing a temporary reduction in the early days of the pandemic, trust assets have rebounded, and have now significantly surpassed pre-pandemic levels. Assets under management recorded a double-digit year-on-year expansion of 18.4 percent, aggregating to P4.8 trillion by end-June 2021. This is equivalent to 24.3 percent of the banking system’s total assets. The related increase in fees and commissions contributed to the sustained profitability of the industry. The net income of trust institutions rose by P1.0 billion or 33.5 percent year-on-year to P3.9 billion. The overall asset mix has been largely unchanged, with funds primarily invested in debt securities, followed by equities and deposits in banks. Nonetheless, we have observed a significant increase in investments in corporate debt and equity securities, which rose year-on-year by 18.8 percent and 39.0 percent, respectively. This is viewed as part of the effort of trust entities to obtain higher yields amid a low interest rate environment. Still, trust assets are highly liquid, with 90.3 percent classified as investments in highly marketable securities and deposits in banks. At the forefront of the trust industry’s growth is the continued surge in participation in unit investment trust funds (UITFs), in terms of both volume and number of participants. 2/5 BIS central bankers' speeches UITF assets grew by 34.1 percent year-on-year to reach P1.3 trillion by end-June 2021. Meanwhile, the number of participants rose by 117.4 percent to almost 1.6 million. The substantial growth in UITFs is a welcome development. The liquidity of UITFs also makes them an appealing investment outlet during these times. The increased online accessibility of UITFs via various digital platforms has certainly contributed to their growth, and we anticipate a continued push in this regard. Policies Under the Trust Business Model Initiative To further the development of the industry, the BSP continues to enhance its regulatory framework for trust entities under the Trust Business Model Initiative. Through the regulatory reforms, which are set to be rolled out in phases, the BSP seeks to emphasize the importance of good governance, effective risk management, and strong consumer protection. The first phase of the Trust Business Model Initiative was rolled out in early 2021, with the amendments to investment management regulations. Circular No. 1109 reduced the minimum amount for opening an investment management account (IMA) and the required investment of each IMA in a commingled account. The lower minimum requirement allows trust entities to tap retail clients seeking returns higher than those of traditional deposit products, thereby increasing the participation of the public in the securities markets. The amendments to the regulations also allow commingled IMAs to invest in a wider range of financial assets. The next phase of the initiative will cover seven areas. Three draft circulars have already been exposed to the trust industry for comments. The first covers the licensing framework for UITFs. The amendments aim to streamline the approval process for UITFs and make it more risk-based. The second provides a common framework for the conduct of accounts review by trust entities. This will help ensure that clients are accorded with the same degree of due diligence regardless of their choice of trustee. The third involves guidelines on the performance measurement of UITFs. This covers the BSP’s expectations on the selection of benchmarks for UITFs, based on the principles of fair representation and full disclosure. These three proposed issuances are now under re-exposure or revision as the BSP considers the comments received. Other policy issuances in the pipeline include comprehensive investment guidelines that will serve as a guidebook on the investment processes for segregated trust accounts, other fiduciary accounts, and investment management accounts. The BSP is also set to amend regulations on onboarding and the client suitability assessment (CSA) process. These amendments will help ensure that onboarding procedures are tailored to clients’ risk profiles regardless of investment mandate. The CSA process will also be expanded to capture the client’s risk tolerance and financial sophistication. Later on, we intend to issue guidance to align the management of UITFs with the International Organization of Securities Commissions’ Principles for the Supervision of Operators of Collective Investment Schemes. 3/5 BIS central bankers' speeches Personal Management Trust regulations will also be amended to clarify supervisory expectations on the process by which trust entities establish the trust purpose and dispositive provisions of such agreements. Broader Regulatory Initiatives On a broader scale, the BSP continues to exert efforts toward the creation of a more responsive and inclusive financial system. Two priority areas in this regard are sustainable finance and digital transformation. In step with the global community, we have increasingly advocated for the wider adoption of sustainable finance in the Philippines. This begins with the integration of sustainability principles into the corporate governance, strategic, and risk management frameworks of our supervised financial institutions. We encourage trust entities to ensure that environmental and social risks are actively considered in your operational risk management systems. The BSP emphasizes the importance of ensuring that funds classified as sustainable are supported by duly differentiated investment strategies. At the minimum, there must be sufficient evaluation of the issuers’ sustainability-related commitments and the sustainable impact of their products. Disclosures regarding sustainable funds should be useful to the decision-making of participants. The objective of investor protection is paramount in this area. Meanwhile, digital transformation is essential in bringing the financial system closer to the people. Last year, the BSP issued the Digital Payments Transformation Roadmap for the period 2020 to 2023. The aim is to move toward a cash-lite economy, in which at least 50 percent of the total volume of retail payments is in digital form. The Roadmap likewise involves the onboarding to the formal financial system of at least 70 percent of Filipino adults. This will be done through payment or transaction accounts using digital services. Relatedly, the BSP has issued the Open Finance Framework, which will provide financial institutions and third parties with “permission-based” access to customer information. This is seen to aid in the development of innovative financial products and services suited to the changing needs of Filipino consumers. Increased digitalization of financial transactions can be supported by the wider implementation of the Philippine Identification System, or PhilSys, which can create a unique, verifiable and biometric-based digital identity for every Filipino. The operationalization of the PhilSys electronic Know Your Customer and authentication facility will facilitate the digital onboarding of clients. This transformation is not limited to payment products and services, but also applies to investments and other financial transactions. Indeed, the exponential leap in the number of UITF participants can be largely traced to new investors using digital platforms. The BSP calls on supervised financial institutions to take steps to meet this demand. As technology has advanced, the digital transformation of trust entities’ systems, processes and services has become ever more vital to success. As always, the BSP reminds financial institutions to exercise caution and ensure that your risk management systems and controls remain well-suited to your evolving operations. Industry Initiatives 4/5 BIS central bankers' speeches The BSP recognizes the efforts of the TOAP toward the sustainable development of the trust industry. In particular, we commend the industry for its continuing efforts to implement and enhance the UITF Certification Program or the UCP for UITF marketing personnel. As the certification requirement will be fully implemented by 2023, we enjoin the TOAP to work with its member-institutions to ensure that UITF marketing personnel are able to successfully complete the Program. The BSP views this as a crucial initiative in ascertaining that that these personnel can provide adequate information on UITFs and promote the safe and effective delivery of financial services to clients. We likewise appreciate our collaboration with the TOAP as we work to expand the PERA ecosystem. The initiative to solicit suggestions from member-institutions is welcome, as there is still a long way for PERA to go to reach its full potential. Trust entities are valued stakeholders in this initiative. We strongly encourage TOAP memberinstitutions to develop new products to serve this worthy endeavor. We also look forward to continuing cooperation on PERA information campaigns. In closing, the COVID-19 pandemic has changed the way we live, and we find ourselves in a new economy. This reality brings with it a set of challenges, but also new opportunities. One’s ability to thrive depends on how one chooses to act. This situation calls to mind a Chinese proverb, which goes: quote “A wise man adapts himself to circumstances as water shapes itself to the vessel that contains it.“ end quote In a time when the environment is constantly changing, adaptability is undoubtedly the key to success. The BSP strongly encourages the TOAP’s efforts toward the improvement of the skills of trust professionals and the enhancement of systems that will allow member-institutions to be more responsive to the needs of the investing public. Rest assured that the BSP will continue to collaborate with you on creating an environment conducive to financial growth and innovation, toward our common goal of deeper and more inclusive Philippine financial markets. 5/5 BIS central bankers' speeches	central bank of the philippines	2,021	12
Speech by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), at the Year-End Market Forum for Maybank Philippines' 25th Anniversary Launch, 23 November 2021.	Benjamin E Diokno: Sustainability in investing Speech by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), at the Year-End Market Forum for Maybank Philippines' 25th Anniversary Launch, 23 November 2021. * * * To Finance Secretary Carlos P. Dominguez National Economic and Development Authority Undersecretary Rosemarie Edillon; Ms. Puan Fauziah Hisam, Chairperson of Maybank Philippines Incorporated; Ms. Abigail Del Rosario, President and CEO of Maybank Philippines Incorporated; Chua Hak Bin of Maybank Kim Eng Singapore; guests, ladies and gentlemen, good afternoon. I am honored to be here at the Year-End Market Forum for Maybank Philippines’ 25th Anniversary Launch. Since Maybank opened its doors in the country in November 1997, the bank’s network has grown to over 60 branches nationwide. Through your corporate social responsibility initiatives and various community and sustainability programs, you were able to demonstrate Maybank’s brand of humanizing financial services. BSP commends Maybank’s sustainability initiatives. We recognize the Maybank Group’s long-term commitments launched in July 2021, including the mobilization of 50 billion Malaysian Ringgit in sustainable finance by 2025, carbon neutral position by 2030, and net-zero position by 2050. We also commend the bank’s governance reforms reflecting its desire to integrate sustainability principles in its corporate structure. As banks take on the “green and sustainable” path, BSP provides the enabling regulatory environment to drive sustainable finance in the country. BSP is also leading by example. We endeavor to embed sustainability principles in everything we do as an institution, as guided by BSP’s Sustainable Central Banking Program. This program underscores the essential roles of the BSP as an enabler, mobilizer, and doer. As an ENABLER, BSP provides policies and structures that will support and facilitate sustainable finance. In this respect, we have issued the Sustainable Finance and Environmental and Social Risk Management Frameworks. Released in April 2020, the Sustainable Finance Framework highlights the overarching principles of integrating sustainability and ESG considerations in banks’ corporate and risk governance frameworks, business strategies and operations. This Framework also underscores the responsibilities of the board of directors in institutionalizing sustainability principles within the organization. Supplementary to this is the Environmental and Social Risk Management Framework. This framework gives more detailed supervisory expectations on the management of environmental and social risks in the context of credit and operational risks. Among these expectations are the gradual increase of loan portfolio allocation for green or sustainable activities or projects, and the consideration of environmental and social risks in the 1/2 BIS central bankers' speeches banks’ operational risk management framework. These frameworks set the essential groundwork in promoting sustainable finance and serve as anchors for succeeding BSP’s policy issuances. Both frameworks will kick into effect by 2023. As a MOBILIZER, the BSP leads and inspires its supervised financial institutions to make environmentally and socially responsible business decisions. We have started integrating sustainability principles in our investment process with over USD 550 million investment in the Green Bond Fund managed by the Bank for International Settlements. We are also reviewing our investment strategy to consider strategic allocation of investments toward those that espouse environmental, social, and governance principles. Several Philippine banks have already started participating in the growing green, social, and sustainability bond market. Latest figures show that those banks have issued green, social, and sustainability bonds totalling USD 1.15 billion and PHP 85.4 billion in both foreign and local currency denominated bonds, respectively. Amid the pandemic, two banks issued social bonds worth approximately PHP 29 billion to finance or refinance the needs of eligible micro, small, and medium enterprises. Issuances by Philippine companies, including banks, reached USD 4.8 billion or 28 percent of the total ASEANlabelled Green, Social, and Sustainability Bonds as of end-October 2021. Climate-proofing the financial system provides growth opportunities for banks such as Maybank. Just recently, we witnessed the landmark climate summit unfold at COP26 in Glasgow. The world’s financial leaders committed to fund the shift to reduce carbon emissions. Private capital was also pledged through the Glasgow Financial Alliance for Net Zero toward the transition to a net-zero economy. Accordingly, the latest Philippine Energy Plan targets 50 thousand megawatts of renewable energy under a clean energy scenario by 2040, or equivalent to 54.3 percent of the total energy mix. In line with this, banks, like Maybank, should start investing in sustainable financial products and services as contribution in achieving the country’s carbon emission reduction targets. Another opportunity is the introduction of other innovative sustainable financial products to fund the post COVID-19 recovery of the MSMEs and agricultural sectors, which were greatly hit by the pandemic. We believe that these opportunities complement the Maybank Group’s long-term sustainability goals. As I end my presentation, let me assure that the BSP will remain steadfast in leading sustainability principles in the banking sector, in line with our national aspirations for sustainable development. Congratulations to Maybank Philippines Incorporated on your silver anniversary. Thank you and Mabuhay! 2/2 BIS central bankers' speeches	central bank of the philippines	2,021	12
Speech by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), at the 76th Philippine Institute of Certified Public Accountants Annual Convention, 24 November 2021.	Benjamin E Diokno: Leadership talk - transformation amidst changes and challenges Speech by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), at the 76th Philippine Institute of Certified Public Accountants Annual Convention, 24 November 2021. * * * Members of the Philippine Institute of Certified Public Accountants led by National President Marydith C. Miguel, guests, ladies and gentlemen, good afternoon Thank you for inviting me to share my thoughts on the topic “Transformation Amidst Changes and Challenges.” Throughout the COVID-19 crisis, the Bangko Sentral ng Pilipinas (BSP) has been leading positive transformation for the banking system and the overall economy. In doing so, we observe four principles represented by the acronym “FIRE”—Flexibility, Inclusivity, Responsiveness, and Excellence. Before I expound on these four principles, let me first briefly discuss latest macroeconomic developments to provide context on the environment banks currently operate in. The economy is well into the recovery process. Gross domestic product (GDP) grew by 12.0 percent in the second quarter and 7.1 percent in the third quarter of this year. The unemployment rate improved from the peak of 17.6 percent in April last year to 8.9 percent in September this year. Inflation decelerated to 4.6 percent last October, bringing the average in the first 10 months of this year to 4.5 percent. While this is above the target band of 2.0 to 4.0 percent—driven by supply issues concerning food and energy items—central bank estimates show that inflation will ease toward the midpoint of the target range next year and in 2023. The country’s gross international reserves (GIR) remain hefty at $107.9 billion as of end-October this year, equivalent to 10.8 months’ worth of imports. The peso averaged P50.1/$1 in the third quarter of 2021, depreciating by four percent from the second quarter average of P48.2/$1. This is not a concern as the country enjoys robust external accounts, and the peso depreciation was driven in part by rising imports of capital goods—a sign of rising investments. The positive macroeconomic developments are in sync with the latest financial sector indicators. As of end-September, the Philippine banking system’s assets grew year-on-year by 7.2 percent, deposits by 8.8 percent, loan portfolio by 2.6 percent, and net profit by 35.0 percent. Moreover, non-performing loans remain manageable, capitalization stays above the regulatory requirement, and liquidity is ample. Following the government’s recent shift in strategy to contain COVID-19—from imposing widearea lockdowns to granular quarantines—there has been a substantial improvement in the country’s COVID situation. 1/4 BIS central bankers' speeches Daily confirmed cases stood at 1,297 last November 18, significantly down from the peak of 26,303 last September 11. Against this backdrop, we expect the economy’s recovery to gain more traction. Now let me go back to F.I.R.E. First, F for Flexibility. The importance of flexibility—the ability to adapt and evolve—has come to fore in efforts to survive and thrive in the crisis. As far as the BSP is concerned, we exhibited flexibility by implementing unorthodox measures to ensure ample liquidity and maintain financial stability at a critical time. We extended short-term loans and remitted dividends in advance to the National Government to support its COVID-relief measures. We started purchasing government securities in the secondary market. We were also flexible enough to temporarily relax some regulations. The relief afforded to banks encouraged them to help their hard-hit customers as well. For instance, the BSP’s move to count loans extended to micro, small, and medium enterprises (MSMEs) as part of banks’ compliance to the reserve requirement, to lower risk weights for certain MSME loans, and to allow staggered booking of loan losses gave incentive for banks to lend. As we recover from the crisis, focus will shift from trying to survive the crisis to navigating the uncertainties of the recovery and post-crisis periods. Individuals, organizations, and economies that are able to seize opportunities from the crisis and adapt will be the champions of tomorrow. This is a solid example of flexibility. This brings me to BSP’s key agenda: The Digital Payments Transformation Roadmap that we launched last year. The Roadmap envisions a cash-lite economy where 50 percent of financial transactions are done digitally by 2023. Last year, we saw a leap in digital payments to 20 percent of total financial transactions in the country versus only 1 percent in 2013. Let me proceed to the next principle: I for Inclusivity. An inclusive economy is one where everyone experiences the benefits of growth; it is one where economic development translates to poverty reduction. The challenge for leaders is to ensure that the benefits of economic recovery is equitable, such that opportunities are created and benefit all segments of society. Under its Digital Payments Transformation Roadmap, the BSP also targets at least 70 percent of Filipino adults to be have transaction accounts by 2023. The BSP has issued enabling regulations and rolled out programs to achieve our goals under the roadmap. For instance, the Digital Banking Framework issued in November last year spells out regulatory guidelines on how to operate digital banks in the country. Now, we already have 6 licensed digital banks. The BSP has also issued the Open Finance Framework, which provides guidelines on consent2/4 BIS central bankers' speeches driven use of customer data for the creation of financial products and services that cater to a wide range of customer needs. We have rolled out a program promoting expanded use of QR codes for payments. The BSP is also actively involved in the Philippine Identification System (Philsys) to allow underserved Filipinos to open transaction accounts and enter the formal financial system. Moving on to the next principle: R for Responsiveness. Responsiveness is demonstrated by the speed and scale by which an individual, organization, or economy addresses a difficult situation head on. In relation to this, the BSP was among the first central banks in the world to respond to the crisis. As early as February 2020, the BSP already cut its policy rates by 25 basis points to provide initial support to the economy. Still on speed, the Financial Institutions Strategic Transfer (FIST) Act was signed into law last February and the BSP issued its implementing regulations in May this year—even as banks’ bad debts remain manageable to date. The FIST law is a pre-emptive measure to ensure banking sector stability in case of significant spike in loan defaults. On scale, the BSP has done quite a lot to respond to the crisis. We have so far injected Php2.3 trillion in liquidity to the financial system, equivalent to 12.8 percent of GDP (as of 14 October 2021). Another key facet of the BSP’s responsiveness is our push for sustainable finance. The BSP, in April 2020, issued the Sustainable Finance Framework. The framework was the first phase of regulations on sustainable finance. With enabling regulations, as well as capacity building and awareness programs of the BSP, we are seeing banks lean toward sustainable financing. Finally, E is for Excellence. Excellence requires mastery and commitment in all aspects of professional practice. The very same tenet requires us, central bankers, to master our craft and continually improve our competencies. In the BSP, we capitalize on programs to attract, develop, and retain talent. We have relentlessly pursued excellence through competency trainings, scholarship programs, and mentoring arrangements. We also leverage on digital technologies and data analytics for decision making and continuing education of our employees. In the same way, the BSP endeavors to embed a culture of excellence and good governance among supervised financial institutions. CPAs are a big part of this. CPAs play an important role in promoting transparency in financial reporting and in reinforcing market discipline. Thus, it is paramount to know the best practices in accounting and auditing, and the latest regulatory developments. 3/4 BIS central bankers' speeches You must be abreast of the latest on Philippine Financial Reporting Standards, Basel reforms, digital transformation, and sustainability, among other important topics. Last July, members of the Financial Sector Forum (FSF)—comprised of the BSP, the Securities and Exchange Commission, the Insurance Commission, and the Philippine Deposit Insurance Corporation—entered into a memorandum of agreement with the Professional Regulatory Board of Accountancy on the establishment of a “one-stop-shop” framework for accreditation of external auditors. This goes to show how regulators value your role in the economy, and we expect all of you in PICPA to be our partners in the pursuit of economic recovery and growth by consistently observing the highest level of professionalism. As CPAs in your respective industries, being flexible in your action plans to surmount the current headwinds and work toward an inclusive, long-term growth will help you and your organization take full advantage of the possibilities awaiting at the close of this health crisis. Rest assured, the BSP will always be a partner in pursuing advocacies that promote the development of the accountancy profession. We count on PICPA and its members in helping safeguard the soundness of financial institutions and the financial system. Again, congratulations on your 76th Annual National Convention and I wish everyone a productive discussion ahead. 4/4 BIS central bankers' speeches	central bank of the philippines	2,021	12
Speech by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), at the Philippine Economic Briefing for the Joint Foreign Chambers, 25 November 2021.	Benjamin E Diokno: Monetary policy and central banking toward a new economy Speech by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), at the Philippine Economic Briefing for the Joint Foreign Chambers, 25 November 2021. * * * To our colleagues in the Philippine government, members of foreign chambers, ladies and gentlemen, good afternoon. I recall I last spoke before the joint foreign chambers in July this year. I am pleased to speak before you again, this time, amidst better circumstances, as recent macroeconomic developments point to a strong and sustainable recovery for the Philippine economy. I always say that while monetary policy only plays a complementary role in addressing the impact of this health crisis, it is a critical one. As such, the BSP has done quite a lot to support economic recovery. We are among the first central banks to respond to the pandemic. We cut policy rates to record lows and reduced the reserve requirement. As of October 14, 2021, BSP has injected ₱2.3 trillion – approximately USD46 billion – into the Philippine financial system. This is equivalent to 12.8 percent of GDP. We also implemented extraordinary measures, including provisional advances to the national government and purchase of government securities in the secondary market. The BSP also implemented time-specific and well-targeted regulatory relief measures to enable our supervised financial institutions to continue supporting the domestic economy. Once full recovery of the economy is underway, the BSP will implement a pre-planned exit strategy which shall safeguard the sustainability of the economic recovery while guarding against any emerging threats to the BSP’s price and financial stability objectives. As BSP keeps policy rates low and maintains accommodative policy stance, it has been observed that banks pass on lower and declining interest rates to their clients. Our efforts to help safeguard livelihood, maintain order in the financial markets, and fuel growth are yielding positive results. Following the 12.0-percent rebound in the second quarter, our third-quarter growth rate of 7.1 percent was among the highest in the ASEAN. The nascent economic recovery is being supported by positive developments on the monetary, external and banking fronts. Inflation is decelerating as food prices decline. Looking ahead, inflation could settle above the 2 to 4 percent target range this year but is expected to revert to our target range in 2022 and 2023. The BSP will continue to closely monitor all risks to future inflation. We will remain vigilant against the emergence of second round effects and any possible unhinging of inflation expectations. 1/3 BIS central bankers' speeches Meanwhile, bank lending has started to recover amid ample liquidity, as well as the improvement in consumer outlook and business sentiment. Non-performing loans of the banking system have risen to 4.43 percent but remain within manageable levels. The operationalization of the FIST Act will allow financial institutions to unload their nonperforming assets and as a result, enhance their capability to provide financial services to productive sectors of the economy. Despite the increase in NPLs, the banking system remains well-capitalized. Our external payments position remains strong with sufficient buffers. The foreign exchange liberalization reforms that we implemented amidst the pandemic highlight our confidence on the resilience of our external payments position. They also showcase our efforts to promote greater ease in the use of FX resources of the banking system, and to further promote an environment conducive to businesses. This opinion is shared by relevant third-party observers. Throughout the pandemic—amid a wave of rating downgrades worldwide—the Philippines maintained its investment grade credit ratings. Beyond the short-term challenges of the pandemic, credit rating analysts say that sound fundamentals and policies will help the Philippines return to a sustainable growth path once the dust settles. While the pandemic temporarily disrupted the Philippines’ growth momentum, it also presented opportunities to accelerate digitalization in the financial sector. To this end, we launched the Digital Payments Transformation Roadmap last year. Under this, we target half of financial transactions to be done electronically and 70 percent of Filipino adults to have financial accounts by 2023. To further accelerate our digitalization initiatives, BSP has approved the license of six digital-only banks. We expect these digital banks to have a strong start as they capitalize on the growing demand for cross-border digital remittances from the large overseas Filipino workforce across Asia and the Middle East. With physical distancing now a norm, we have seen substantial increase in transactions in PESONet and InstaPay. Looking beyond the country’s borders, the BSP and the Monetary Authority of Singapore recently signed an enhanced FinTech Cooperation Agreement to facilitate interoperable payments between the Philippines and Singapore. The BSP intends to pursue similar arrangements with other monetary authorities in the ASEAN region. As we build our digital finance ecosystem, we encourage foreign investors who may bring advanced technologies and technical expertise to take advantage of untapped potentials in the financial services space and be our partners in achieving our economic growth and financial inclusion objectives. 2/3 BIS central bankers' speeches In closing, I would like to highlight the following: First, the Philippines’ macroeconomic fundamentals remain sound. Together with carefully thought-out policy and public health responses and the sustained vaccine rollout, these will carry the Philippine economy toward sustainable recovery. Second, targeted fiscal support remains central to the COVID-19 response. Monetary policy will remain accommodative until domestic demand and overall macroeconomic activity recovers, as the BSP keeps in mind its price and financial stability objectives. And third, the BSP continues to support reforms aimed at raising the country’s competitiveness and transforming the financial landscape so that it is future-ready through digitalization and adopting sustainability principles. Thank you very much for your attention. 3/3 BIS central bankers' speeches	central bank of the philippines	2,021	12
Speech by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), at the Asian Development Bank Institute Forum, 25 November 2021.	Benjamin E Diokno: The Bangko Sentral ng Pilipinas’ monetary policy - insights from the pandemic Speech by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), at the Asian Development Bank Institute Forum, 25 November 2021. * * * Good day, everyone. In the wake of the slowdown in COVID cases and progress in vaccine rollout, the Philippines has eased most mobility restrictions, and things are slowly but steadily going back to normal. We at the Philippine central bank are focused on sustaining this road to recovery. At the same time, we are working on implementing a well-calibrated exit strategy that is consistent with our price and financial stability objectives. In response to the crisis, we introduced extraordinary liquidity-enhancing measures to boost economic activity by supporting domestic demand, and to keep the financial system in order by managing possible pandemic spillovers to the financial system. First were measures to boost market confidence, such as cuts in the policy rate and the reserve requirement. Lower policy rate was meant to influence banks to cut their own lending rates, thereby promoting credit-taking activities. Meanwhile, lower reserve requirement increased the volume of loanable funds. At the same time, the BSP’s active monetary operations have been calibrated in terms of size to keep short-term market interest rates low and support the effective transmission of the monetary stance to key financial variables. These monetary policy measures have helped support domestic demand. With GDP growing at 12.0 percent in the second quarter and 7.1 percent in the third quarter of this year, we can say that the economy is well into the recovery process. The effectiveness of interventions is evident in the sustained decline in domestic market interest rates, which have decreased in parallel with the BSP’s policy rate. For example, the average interbank call loan rate of 1.7 percent (as of October 2021) represents a 222-basis point decline relative to January 2020. Similarly, the 91-day T-bill rate as of September 2021 fell by more than 200 basis points over the same period. Bank lending growth is also picking up. Preliminary data show that the outstanding loans of universal and commercial banks, net of RRP placements with the BSP, rose by 2.7 percent year-on-year in September 2021, which was faster than the 1.3-percent expansion in August. The increase in loans reflects the modest recovery in banks’ overall lending attitudes along with improved economic prospects owing to the gradual lifting of lockdown measures. Outstanding loans for production activities was mainly driven by the expansion in loans for real estate (7.2 percent), information and communication (26.6 percent), financial and insurance (6.0 percent), and manufacturing (4.4 percent). We see loan activity continuing to improve in the coming months as public health restrictions are gradually eased and domestic demand gains further traction. Looking ahead, the central bank will remain patient in keeping policy support available to the 1/2 BIS central bankers' speeches economy—particularly given the continued downside risks to economic activity associated with the pandemic. The inflation outlook over the policy horizon remains manageable. Average inflation is seen to slightly exceed the upper end of the target band of 2-4 percent this year but is projected to settle close to the midpoint of the target range in 2022 and 2023. Inflation expectations remain firmly anchored to the baseline projection path. But we are ready to adjust policy settings as needed to ensure the fulfillment of its price and financial stability mandates. We aim a smooth normalization of our time-bound pandemic measures. Monetary policy settings will be outcome-based rather than anchored on a particular date. Consistent with such approach, we will remain guided primarily by the outturns in economic data, such as inflation, real sector activity, and liquidity and credit conditions. I will end here. 2/2 BIS central bankers' speeches	central bank of the philippines	2,021	12
Speech by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), at the Joint Foreign Chambers of the Philippines 10th Anniversary Forum "Arangkada Philippines; Pathways to a Better Future", virtual, 30 November 2021.	Benjamin E Diokno: Economic and financial developments and Bangko Sentral ng Pilipinas’ policy responses Speech by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), at the Joint Foreign Chambers of the Philippines 10th Anniversary Forum “Arangkada Philippines; Pathways to a Better Future”, virtual, 30 November 2021. * * * Officers and members of AmCham Philippines and the Joint Foreign Chambers of the Philippines, my fellow speakers, everyone who are with us virtually, good morning. Thank you for inviting me to deliver a keynote address in your Tenth Anniversary Forum entitled “Arangkada Philippines: Pathways to a Better Future.” Arangkada comes from the Spanish word arrancada which means accelerate. My talk will focus on economic and financial developments and BSP policy responses to ensure that the Philippine economy will continue to accelerate towards a better future. After five quarters of economic contractions, the country’s real GDP grew by 12 percent in the second quarter of 2021 followed by a 7.1 percent growth in the third quarter. For the first three quarters of 2021, the Philippines’ economic growth averaged at 4.9 percent, within the government’s target of 4 to 5 percent for the year. In September 2021, however, the country’s unemployment rate increased further to 8.9 percent from 8.1 percent in the previous month. This result is not surprising, given the extension of strict lockdown measures during the month. What is notable here, however, is that some of the jobs lost at the start of the pandemic have been gradually recovered, with the number of workers employed in September exceeding that of pre-pandemic level. The re-imposition of stricter lockdown measures, particularly in the National Capital Region, contributed to lower business confidence in the third quarter survey, although businesses are more optimistic for the last quarter of the year and in the next 12 months. On the other hand, consumer sentiment continues to improve due to expectations of availability of more jobs, additional or higher income, and effective government policies and programs, particularly in addressing COVID-19-related concerns. The country’s year-on-year headline inflation decreased further to 4.6 percent in October 2021 from 4.8 percent in September, bringing the year-to-date average inflation to 4.5 percent. This is above the Government’s inflation target of 3.0 percent ± 1.0 percentage point for 2021. Based on latest data, we expect point inflation for November to range from 3.3 to 4.1 percent. The latest CPI outturn is consistent with the BSP projections that while inflation could remain elevated in the near term, it would start to fall within the target range by the end of the year. Meanwhile, inflation expectations remain firmly aligned with the baseline projection path for 20222023. Results of the BSP’s survey of private sector economists for November 2021 showed an elevated mean inflation forecast of 4.4 percent for 2021, 3.5 percent for 2022 and 3.2 percent for 2023. Liquidity in the financial system remains ample, expanding by 8.2 percent year-on-year in September 2021. This was faster than the 6.9-percent growth recorded in August on a monthon-month seasonally adjusted basis, M3 rose by 1.3 percent. Credit activity increased 2.7 percent in September 2021, faster than the 1.3-percent expansion in August. The continued growth for the second month in outstanding loans of universal and commercial banks reflects the modest recovery in banks’ overall lending attitudes along with 1/4 BIS central bankers' speeches improved economic prospects. As of end-September 2021, gross non-performing loan ratio of the Philippine banking system (PBS) stood at 4.4 percent, higher compared to 3.5 percent a year ago. The uptick, however, was accompanied by loan-loss provisioning with a non-performing loans coverage ratio of 84.4 percent. The Philippine banking system remains well-capitalized. As of the second quarter of 2021, its capital adequacy ratio is at 17.2 percent, well above the 10 percent minimum threshold set by the BSP and the 8 percent set by the Bank for International Settlements. On the external front. The sustained rebound in key economies has spurred external demand. The country’s exports and imports of goods increased by 21.3 percent and 31.6 percent, respectively. Cash remittances from overseas Filipinos grew by 5.6 percent in January to September 2021, from a 1.4 percent contraction in the same period in 2020. Meanwhile, business process outsourcing services in the first half of 2021 remained strong despite the disruption in business activities around the world. Net foreign direct investments for the first eight months of 2021 increased due to positive foreign investor sentiment on the country’s macroeconomic fundamentals and strong growth prospects. The country’s outstanding external debt also remains at a prudent level as its ratio to GDP slightly eased to 26.5 percent in end-June 2021. Notably, a large portion of the country’s external debt has medium- and long-term maturity profile and carry fixed interest rates. These two factors make the servicing of foreign debt less susceptible to volatilities in global interest rates or foreign exchange fluctuations. The gross international reserves stood at US$108 billion as of October. This is equivalent to almost 11 months’ worth of imports of goods and payments of services and primary income. The conventional wisdom is that 3 months’ worth of imports is sufficient. The GIR level is also about 7.8 times the country’s short-term external debt based on original maturity, and 5.4 times based on residual maturity. The gross international reserves continue to be augmented by improving inflows of cash remittances from overseas workers and receipts from business process outsourcing. On MSMEs: The BSP recognizes the crucial role of micro, small, and medium enterprises in the Philippine economy. Let me discuss the wide range of policies and regulatory and relief measures that the BSP has deployed to support MSMEs. - One is allowing the new peso-denominated loans to MSMEs and critically impacted large enterprises that do not belong to a conglomerate as eligible instruments for compliance with the BSP’s reserve requirement. The use of MSME loans as allowable alternative compliance with the reserve requirement shall be available to banks and non-bank financial institutions with quasibanking functions from 24 April 2020 to 29 December 2022, subject to early closure of the eligibility window by the Monetary Board, if warranted and with prior notice. - For the week ending 31 October 2021, the banking system allocated an average of P202.2 billion loans for MSMEs as alternative compliance with the reserve requirements. This level marks a substantial increase from the P8.7 billion average MSME loans that were reported for the week ending 30 April 2020. The latest level is equivalent to 13.6 percent of the total required reserves, from 0.6 percent on 30 April 2020. - The Monetary Board also approved prudential measures to assist MSMEs. The regulatory capital treatment of MSME exposures was amended to temporarily reduce the risk weights of 2/4 BIS central bankers' speeches loans granted to MSMEs. The implementation of the revised risk-based capital framework for banks was also deferred from end-2021 to end-2022 - The period of relief on the reporting of past due and non-performing loans of borrowers affected by the pandemic was also extended to 31 December 2021 from the original timeline of 8 March 2021 subject to reporting to the BSP. - These policy issuances reinforce earlier pronouncements of the BSP that relax the Know-YourCustomer requirements for retail clients to facilitate their access to formal financing channels. Given a manageable inflation path, the BSP has kept the key policy interest rate at 2.0 percent in its latest Monetary Board meeting. The BSP’s policy and liquidity-easing measures have injected into the financial system a total liquidity equivalent to around 13 percent of the country’s full year nominal gross domestic product for 2020 as of November 11, 2021. Moving forward, the BSP’s actions and policy thrusts will continue to be anchored on its core mandates of promoting price and financial stability. Towards this end, the BSP will continue to pursue appropriate policy actions responsive to the needs of the time. On monetary policy: the BSP will remain vigilant over the current inflation dynamics to ensure that the monetary policy stance continues to support economic recovery to the extent that the inflation outlook would allow. It will carefully scan the operating environment with a forwardlooking perspective to move in a pre-emptive fashion to address any risks to our price stability mandate. On the financial sector: the BSP will intensify its monitoring and surveillance over its supervised institutions to ensure that they remain resilient to emerging risks and continue to be sound, stable, and inclusive, particularly through the pursuit of enhanced digitization. Finally, on the external sector: the BSP will remain supportive of policies that will help strengthen the economy’s resilience to external shocks, including that of maintaining a market-determined exchange rate, keeping a comfortable level of reserves, and keeping the country’s external debt manageable. More recently, the country has managed to successfully reduce the number of COVID-19 cases. As of the other day, the Philippines logged 425 new COVID-19 cases. This is the lowest since July 2020. Considering the recent economic developments and significant improvement in vaccine rollout, we are optimistic that there is sufficient support for the country’s recovery this year and in the near term. The management of risks through the calibrated reimposition of lockdown restrictions, the expected revitalization of key industries due to government policy support and structural reforms, and an improving global economy should help the Philippine economy to recover in 2021 and accelerate in 2022. Finally, allow me to end my presentation with these key points: • The country’s macroeconomic fundamentals remain sound. • The latest GDP growth suggests that economic rebound is underway. Strong growth is expected in 2022. o The currently elevated inflation is due to transitory factors. Inflation remains well-anchored. o Banks remain sound and while non-performing loans has increased, banks remain highly capitalized. 3/4 BIS central bankers' speeches o External position is strong, supported by more than adequate external liquidity buffer and improving inflows from overseas Filipinos’ remittances and receipts from business process outsourcing. o Economic activity is vastly improving. Yet, the overall momentum of the economic recovery remains foggy as long as a big part of the population remains unvaccinated and there is still a possible emergence of more virulent variants. Nevertheless, the sustained implementation of targeted fiscal initiatives, as well as the acceleration of the vaccination program, should help boost market confidence and economic recovery. The BSP is committed to an accommodative monetary policy stance supportive of infusing liquidity in the financial system and recovery of the economy. The BSP’s actions and policy thrusts will continue to be anchored on its core mandates of promoting price and financial stability. Thank you. 4/4 BIS central bankers' speeches	central bank of the philippines	2,021	12
Speech by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), at the HSBC "ASEAN Next – Dialogue on Digital Banks", 30 November 2021.	Benjamin E Diokno: Financial digitalization - harnessing potentials for a better post-Covid Philippine economy Speech by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), at the HSBC “ASEAN Next – Dialogue on Digital Banks”, 30 November 2021. * * * Ladies and gentlemen, a pleasant day to all of you. I thank HSBC for inviting me to speak in your “ASEAN Next—Dialogue on Digital Banks”. The COVID-19 crisis has brought enormous challenges for economies worldwide. We at the central bank are harnessing the potentials of financial technology to help achieve full recovery and realize a stronger post-COVID Philippine economy. Following the 12.0-percent rebound in the second quarter, the economy grew by 7.1 percent, the highest among ASEAN nations. The further de-escalation of alert level and easing of mobility restrictions nationwide, but especially in the National Capital Region, would help restore jobs in the last quarter of this year. Based on Google mobility, we continue to see significant progress in mobility versus last year. The economic recovery is being supported by positive developments on the monetary, external and banking fronts. Price movement is manageable, providing an enabling environment for pickup in consumption and investments. Looking ahead, inflation could settle above the 2 to 4 percent target this year on account of supply-side pressures but is expected to revert to the target range in 2022 and 2023. External trade has recovered. From January to September, exports grew by 18 percent, while imports grew by 30.3 percent. Meanwhile, foreign direct investments jumped almost 40 percent in the first eight months of the year with the bulk coming from manufacturing and financial services. Our external payments position remains strong. As of October, the gross international reserves stood at US$108 billion. This is equivalent to almost 11 months’ worth of imports of goods and payment of services and primary income. The conventional wisdom is that 3 months’ worth of imports is sufficient. Let’s now move on to the Philippine banking sector’s performance. Benefitting from regulatory reforms of the past two decades, banks in the country have built resilience to shocks. While the pandemic caused a rise in soured debts, asset quality remains sound. Banks also have ample buffers against credit losses. For one, Philippine banks have generally observed prudent lending standards amid sound regulatory environment. Also, the Financial Institutions Strategic Transfer (FIST) Act, allowing banks to dispose bad assets to asset management companies serves as pre-emptive measure to manage any increase in loan defaults. 1/3 BIS central bankers' speeches Banks have ample capacity to absorb shocks, with capitalization remaining well beyond the minimum regulatory requirements. Banks also enjoy more-than-enough liquidity. Meanwhile, bank lending has recovered on improving demand for loans. Banks have also remained profitable throughout the crisis. All these key indicators attest to the ability of the banking sector to support recovery of the Philippine economy. While the road to full recovery remains iffy, the medium- and long-term prospects for the Philippines are promising. Moving on to BSP’s financial digitalization agenda … The rationale behind the push for financial digitalization is two-fold. First, is robust economic growth. Technology speeds up financial transactions, thereby hastening capital recovery and income generation. Second is financial inclusion. Technology allows the underserved sectors— such as low-income earners and people from remote areas—to easily access affordable financial products and services, including credit for livelihood activities. The BSP launched last year the Digital Payments Transformation Roadmap—our blueprint for transforming the Philippines into a cash-lite society. Under this roadmap, we aim to achieve a shift of at least 50 percent of retail payments to digital transaction; and 70 percent of Filipino adults to have a formal financial account by 2023. We are confident of hitting the twin goals. On the first goal, in terms of volume, the share of digital payments to total financial transactions reached 20.1 percent in 2020 from 14.0 percent in 2019 and only 1.0 percent in 2013. Last year’s target of 20.0 percent seemed unrealistic for many, but we were able to achieve it with active promotion. The mobility restrictions caused by the pandemic contributed to the wider adoption of digital payments. As more Filipinos embrace the convenience of digital payments, we expect the phenomenal growth in digital financial transactions to continue in the years ahead. On the second goal, registered electronic money accounts reached 138.8 million last year with a total number of transactions of 1.7 billion. Meanwhile, the number of basic deposit accounts reached 7 million with PHP4.8 billion deposits in the first quarter of 2021. As of the first quarter of 2021, the proportion of “banked” Filipino adults have reached 53 percent, nearing the target of 70 percent. These include basic deposit and e-money accounts. The BSP welcomes the recent issuance of the implementing rules and regulations of Executive Order No. 127, which liberalizes access to satellite services by allowing non-enfranchised but registered Internet Service Providers (ISPs) and Value-Added Service Providers (VASPs) to directly access satellite systems to build broadband facilities. This is expected to improve the quality and reduce the cost of internet services in the country, which bodes well for our financial digitalization and inclusion agenda. The BSP has achieved milestones in digital banking. Following the issuance last year of the “Digital Banking Framework”, the BSP has already granted licenses to 6 entities. 2/3 BIS central bankers' speeches We expect these newly licensed digital banks to bring banking in the Philippines to new heights. The BSP has launched last month the “QRPh P2M (person-to-merchant),” that will promote extensive use of QR codes, enabling payments to vendors and public transport. Other initiatives in the pipeline will make electronic bills payment more convenient. The “interoperable bills payment facility” will allow bills payment of customers to billers even with different service providers. The “Direct Debit” facility provides customers the option to allow automatic debiting of recurring bills payments from their accounts. Meanwhile, the “Request to Pay Facility” allows payees to electronically send a “request to pay” so that payors may conveniently do payments by simply responding to the request. Additionally, as part of our financial digitalization drive, the BSP is working with the Department of Labor and Employment to promote digitalization of wage payments, and with the Department of Transportation to expand the use of digital platforms to pay for transport fares. The BSP likewise supports the Philippine Identification System, which will allow unbanked Filipinos to finally open financial accounts, thereby accelerate financial inclusion. Looking beyond the country’s borders, the BSP and the Monetary Authority of Singapore recently signed an enhanced FinTech Cooperation Agreement to facilitate interoperable payments between the Philippines and Singapore. The BSP intends to pursue similar arrangements with other monetary authorities in the ASEAN region. Moreover, the BSP is also studying the Bank for International Settlement (BIS) Innovation Hub’s Project Nexus. “Nexus” is a model for connecting multiple instant payment systems into a single cross-border platform. While this project is not yet operational, the BSP is using its blueprint as a guide in designing cross-border arrangements to support bilateral and multilateral platforms in the future. Lastly, the BSP is supporting legislative reforms that complement the financial digitalization agenda. One is the Financial Consumer Protection bill, which will strengthen the BSP’s ability to address consumer concerns on electronic financial accounts and enhance consumer safety and trust on the digital financial system. Also, the Open Access in Data Transmission bill, which seeks to lower the barriers and cost of entry in the data transmission industry to attract more players. This proposed legislation is expected to significantly improve the quality of internet services, helping our digitalization efforts flourish. With financial digitalization I am confident that we will achieve the stronger post-covid economy that we envision sooner rather than later. Thank you very much for your attention. 3/3 BIS central bankers' speeches	central bank of the philippines	2,021	12
Speech by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), at the Tuesday Club's New Year Brunch, Manila, 3 January 2022.	Benjamin E Diokno: The Philippine economy in 2022 - toward a steady recovery path Speech by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), at the Tuesday Club's New Year Brunch, Manila, 3 January 2022. * * * Good morning, everyone. I am happy that our yearly tradition of spending the first Tuesday of the year together lives on despite recent developments. As we open the chapter that is 2022, allow me to go over the highlights of our economic performance in the year that has passed. The Philippine economy in 2021 made significant strides in terms of recovery, jumpstarting favorable prospects for 2022. As you know, BSP has done quite a lot to support economic recovery. On top of policy rate cuts to record lows and reduction in the reserve requirement, the BSP did extraordinary measures to boost liquidity in the financial system. As of November 11, the BSP has injected an estimated ₱2.3 trillion into the Philippine financial system, equivalent to about 12.5 percent of GDP. Once full recovery of the economy is underway, the BSP will implement a pre-planned exit strategy. On the back of strong fiscal and monetary support, as well as government’s health measures, the economy—after five consecutive quarters of decline—rebounded strongly in the second quarter of last year with a growth of 12 percent followed by a 7.1 percent growth in the third quarter. With these positive developments, the government raised its full-year growth assumption for 2021 to 5.0-5.5 percent. Labor conditions have improved as quarantine measures ease. Last October, the unemployment rate dropped to 7.4 percent following a peak of 17.6 percent in April last year. Meanwhile, inflation decelerated from 4.6 percent in October to 4.2 percent in November 2021, bringing the year-to-date inflation to 4.5 percent. This is above the 2.0- to 4.0-percent target, but based on latest BSP estimates, inflation will head toward the midpoint of the target range next year and in 2023. The Development Budget Coordination Committee decided to retain the current inflation target range at 2.0 to 4.0 percent for 2022–2024. Inflation expectations have remained firmly aligned with the BSP’s inflation assumption for 2021 and target for 2022–2023. Results of the BSP’s survey of private sector economists showed their mean inflation forecast at 4.4 percent for 2021. Most economists saw the risks to the inflation outlook for 2021 as tilted to the upside due to persistent supply disruptions and rising global oil prices. Nevertheless, for 2022 and 2023, economists expect inflation settling within target at 3.5 and 3.1 percent, respectively. Liquidity in the financial system remains ample. Domestic liquidity expanded by 8.3 percent year1/3 BIS central bankers' speeches on-year to P14.8 trillion in November 2021, extending an uptrend since July. As I mentioned, the various liquidity-easing measures of BSP have injected some 2.3 trillion pesos into the financial system, the equivalent of 12.5 percent of GDP. Meanwhile, outstanding loans of universal and commercial banks, net of reverse repurchase placements with the BSP, increased at a faster rate of 3.5 percent year-on-year in October from 2.7 percent in September. The continued recovery in bank lending activity reflects the sustained expansion in business activity amid easing quarantine restrictions, declining COVID-19 cases, and increased vaccinations. The country’s external sector continues to provide sufficient buffers to ward off the potential adverse effects of external headwinds. Our gross international reserves, which stood at US$107.7 billion as of end-November 2021, continue to provide ample cushion against unforeseen demand for foreign exchange liquidity. This is equivalent to 10.2 months’ worth of imports of goods and payments of services and primary income. It is also about six to nine times the country’s short-term external debt, based on residual and original maturity, respectively. Amid the strong rebound in external demand in key trade partners, the country’s exports of goods increased by 16 percent in January to September 2021. Meanwhile, following the gradual resumption of domestic economic activities and restocking of inventories, imports of goods grew at a much faster rate of 30.2 percent in the same period. This resulted in a wider trade deficit of US$36.6 billion and has caused the overall balance of payments’ position to the reversal of the deficit of US$665 million in the first nine months of 2021, from a US$6.9 billion surplus in the same period last year. The country’s external sector remains supported by structural foreign exchange flows from overseas Filipino remittances, business process outsourcing receipts, and foreign direct investments. Cash remittances from overseas Filipinos are steadily flowing in with a 5.3-percent growth posted in January to October 2021 from a slight contraction in 2020. Meanwhile, business process outsourcing services exhibited strong recovery in the same period with 8.3-percent growth, as the sector was quick to adjust to the new work arrangements. Net foreign direct investments in January to September 2021 increased to USD7.3 billion from US$ 5.1 billion last year. This is due to positive foreign investor sentiment and improving confidence on the country’s growth prospects. This bodes well for job creation. Favorable external debt profile acts as a cushion against external shocks. External debt-to-GDP ratio settled at 27.3 percent as of end-September 2021, compared with about 60 percent in mid-2000s. Given that the bulk of the country’s external debt have medium and long-term maturity, and bears fixed interest rate, debt repayment schedule is more manageable and financially sustainable over the medium to long term. Considering recent economic developments and significant progress in vaccine rollout, we are optimistic that there is sufficient support for the country’s recovery this year and in the near term. The management of risks, the expected revitalization of key industries from government policy support and structural reforms, as well as the resumption of global economic activities, should 2/3 BIS central bankers' speeches help the Philippine economy move toward a steady recovery path. While there are challenges ahead of us, we are making good progress in terms of economic recovery. That should motivate us to persevere harder and keep moving forward. We, at BSP, are all set to support and guide the economy on a steady recovery path toward growth and onward to a post-COVID-19 economy that is sustainable and digitally inclusive. Maraming salamat at manigong bagong taon sa ating lahat! 3/3 BIS central bankers' speeches	central bank of the philippines	2,022	1
Speech by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), at the Rotary Club of Manila 25th Membership Meeting, Manila, 5 January 2022.	Benjamin E Diokno: The COVID-19 pandemic and the economy Speech by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), at the Rotary Club of Manila 25th Membership Meeting, Manila, 5 January 2022. * * * Good afternoon, fellow Rotarians. Today, I’ll discuss what BSP did at the onset and during the pandemic, why we did what we did, and the outcomes. I will then turn to the present state of the economy and our prospects in the near and medium term. When the gravity and magnitude of the pandemic first came to the fore, the Bangko Sentral ng Pilipinas acted swiftly and decisively to contain the economic fallout. As early as February 2020 — before the first local virus transmission was even confirmed – the Monetary Board cut the policy rate by 25 basis points. By the end of 2020, the policy rate was cut by another 175 bps, bringing the cumulative reduction to 200 bps; from 4 percent to a record low of 2 percent. Similarly, the reserve requirement ratio (RRR) was reduced to increase the volume of loanable funds in the system. For universal and commercial banks as well as non-bank financial institutions with quasi-banking functions, the RRR was cut from 14 percent to 12 percent, while the RRR for thrift banks was cut from 4 percent to 3 percent and from 3 percent to 2 percent for rural/cooperative banks. These efforts were accompanied by a wide range of regulatory and operational relief measures for financial institutions. Knowing that small businesses were hard hit by mobility restrictions and lockdowns, we incentivized bank lending to MSMEs by treating new loans to MSMEs as compliance with the reserve requirement. In addition, we temporarily increased the single borrowers’ limit and raised the ceiling for real estate loans of universal and commercial banks from 20 percent to 25 percent. And to provide relief to beleaguered borrowers, we excluded some loans from being tagged as past due or non-performing and allowed a grace period for loan settlement and restructuring of rediscounted loans. We are slowly seeing signs of economic normalization as a result of our concerted efforts. Bank lending appears to have bottomed out, with loans by universal and commercial banks expanding by 4.0 percent in November from 3.5 percent in October. The latest uptick marks the fourth straight month of growth after several months of contraction. The effectiveness of our monetary interventions could also be seen in the sustained decline in domestic market interest rates. By October, the 91-day T-bill rate as of September 2021 fell by more than 200 basis points over the same period. In addition, the central bank suspended certain online banking charges and temporarily waived fees for applications for electronic payments and financial services and PhilPASS fund transfer transactions to provide continued access to financial services during this time. During the pandemic, we even put a cap on credit card charges to ease the financial burden on consumers. Under Circular No. 1098, we maintained the maximum interest rate or finance 1/4 BIS central bankers' speeches charge on unpaid outstanding credit card balance at 2 percent per month or 24 percent per year. The monthly add-on rates that credit card issuers can charge on installment loans is retained at a maximum rate of 1 percent. Beyond targeted monetary policy measures, the BSP implemented extraordinary liquidity measures to help the national government finance its COVID-19 response. As a former budget secretary under three administrations, I fully appreciate the predicament of the national government as it faces this unprecedented crisis. As the economy contracted, revenues plummeted. At the same time, with the need to build healthcare facilities, deploy more health care workers, purchase more medical equipment and vaccines, distribute food and cash assistance to a great majority of quarantined Filipinos, the national government had to ramp up public spending. As a result, the budget deficit increased from 3.4 percent of GDP in 2019 to 7.5 percent in 2020. As of end-September, our budget deficit as a share of GDP stood at 8.3 percent. The ultimate challenge is how the national government can finance its soaring budget deficit without raising its costs of borrowing, which in turn could increase domestic interest rates. As an extraordinary measure deployed only during extraordinary times, the BSP extended PHP540 billion (approximately US$10.8 billion) in direct provisional advances to the national government. In addition, we remitted PHP23 billion (approximately US$460 million) in dividends to augment the government’s pandemic war chest. To date, through its various measures, BSP has injected PHP2.3 trillion in liquidity into the financial system. This is equivalent to nearly 13 percent of the size of the Philippine economy. But while we have deployed extraordinary measures in response to the unprecedented nature of this crisis, our policy toolkit and regulatory space are far from exhausted. We stand ready to support the country’s continued recovery using the tools at our disposal. However, I would also like to point out that that these policy interventions didn’t happen in isolation. Rather, these developments occurred against a backdrop of proactive reforms and policy actions over the years to crisis-proof the financial and economic system. While the pandemic may have sped up the pace of reform, these structural adjustments were well underway even before COVID-19 hit, allowing the Bangko Sentral to take a longer-term view of the rapidly evolving situation. When I took the helm of the central bank in March 2019, our reserve requirement ratio was among the highest in the world. That year alone, we cut the RRR by a cumulative 400 basis points – from 18 percent by the end of 2018 to 14 percent in 2019. This brought our RRR more in line with China’s 13.5 percent. The 200-bp reduction in April 2020 brings our RRR to the current 12 percent. Even before the pandemic, I have made it my goal to reduce the RRR to single-digit level and shift to market-based instruments in order to manage overall liquidity. This goal remains to be in our policy agenda. Likewise, the policy rate, which banks use as reference for their respective lending rates, was as high as 4.75 percent when I was appointed two years ago. Today, it stands at a record low of 2 percent. The other lofty goals that we have been pursuing even before the pandemic are the acceleration of digitalization and the widening of financial inclusion. I made it clear during my first year as BSP 2/4 BIS central bankers' speeches Governor that before the end of my term in 2023, I want at least half of all retail transactions in digital form and at least 70 percent of adult Filipinos to own a transaction account. I’m pleased to announce that we are making great progress in achieving both goals. On the state of the economy… The Philippine economy appears to have turned the corner and appears set for faster growth. GDP grew by 7.1 percent in the third quarter of 2021 following a remarkable 12-percent expansion in the second quarter. BSP staff predicts that the economy will grow by 7.4 percent in the fourth quarter. The Development Budget Coordination Committee (DBCC) agreed. It adjusted its GDP growth projection upward for 2021 to 5.0-5.5 percent from 4.0-5.0 percent. Moreover, it expects the economy to grow by 7.0-9.0 percent in 2022 and 6.0-7.0 percent in 2023 and 2024. Another macroeconomic concern is inflation. For monetary authorities around the world, the foremost question is whether the elevated inflation is temporary or permanent in nature. Views diverge. A number of central bankers chose to tighten monetary policy to keep their economies from overheating while others opted to take a wait-and-see approach. For the Philippines, inflation settled at an average of 4.5 percent in 2021 after falling to 3.6 percent in December from 4.2 percent in November. This is slightly above the official target range of 2-4 percent. The elevated inflation this year is driven largely by supply-side pressures and do not warrant monetary interventions at this time. But we expect it to revert to 3.3 percent in 2022 and 3.2 percent in 2023. Based on survey of selected economists, inflation expectations remain anchored. An important policy question is: should we follow other central banks who have tightened policy at this time in the face of persistently elevated inflation? I disagree. To me, the harm of tightening monetary policy too soon exceeds the harm of moving too late given that the Philippine economy is still at its nascent state of recovery. This crisis, while unprecedented in scale and scope, is unlike other crises in the past. Previous Philippine crises were characterized by rising interest rates cum depreciating peso, aggravated by foreign exchange outflows. By contrast, in this crisis, interest rates are at a historic low and the gross international reserves (GIR) are more than sufficient. The GIR reached USD107.72 billion in November. This level is equivalent to 10.2 months’ worth of goods imports and payments of services and primary income. The received doctrine is that three-months’ worth of goods imports is sufficient. The level also represents 8.7 times the country’s short-term external debt based on original maturity and 5.7 times based on residual maturity. Thanks to receipts from business process outsourcing firms and remittances from overseas Filipinos, we expect GIR levels to remain steady or expand even more. I am cautiously optimistic on the economic prospects of the Philippine economy. I agree with DBCC’s GDP growth projection: 5.5 percent in 2021, 7 to 9 percent in 2022 and 6 to 7 percent in 2023 and 2024. On inflation, BSP is forecasting 2 to 4 percent in 2022 up to 2024, provided the national government continues to address supply-side factors affecting food items. 3/4 BIS central bankers' speeches Recall that in 2019, we were able to tame inflation after reforming rice trade. We should do more of liberalization of food items. Beware of politicians and pseudo economists who advocate that we should reverse what the Duterte administration has done on the liberalization of food items. Policy reversal will be disastrous, should that happen. My optimism for the future is grounded on what the Duterte administration has done so far. Tax reform. Investment in human capital. Golden age of infrastructure. Rice liberalization. Digitalization in banking and government services. These reforms have a positive effect on our desire to keep prices reasonable and steady, the fiscal system sound, and the economy efficient and competitive. On inflation, let me remind you that everyone benefits from reasonable and stable prices, but especially the fixed income earners and the poor. Finally, one important point. Every now and then, an unprecedented crisis will come along that will naturally consume the time and effort of our politicians and policymakers. The appropriate behavior is to address the core of the crisis. But let the crisis of the hour not distract them from our long-term goals as a nation and a society. In other words, we should not let the COVID-19 pandemic derail our long-term goals. With or without crisis, we should continue to pursue structural reforms that would put the Philippines not just on the road to pre-crisis growth but on a sustainable path of development. That is why I support the three pieces of legislation aimed at liberalizing the Philippine economy: first, the Retail Trade Liberalization Act, which will lower the minimum paid-up capital for foreign retailers; second, the amendments to the 80-year-old Public Service Act which will open up key economic sectors, including telecommunications and airlines; and thirdly, the amendments to the Foreign Investments Act which will encourage foreign professionals to bring their practice, know-how, and technical expertise to the Philippines. Fortunately, all three measures are nearing the finish line. I am confident that with these game-changing reforms, we can achieve real change in the lives of ordinary Filipinos through more and better jobs and more competitive economy. After all, the true measure of our effectiveness and relevance as an institution goes beyond our oft-cited mandates of price and financial stability, sound banking supervision, and an efficient payments and settlement system. It is best found in the real economy, in improving the lives of our countrymen. Thank you. 4/4 BIS central bankers' speeches	central bank of the philippines	2,022	1
Message by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), at the 73rd Inaugural Meeting of the Management Association of the Philippines, Manila, 12 January 2022.	Benjamin E Diokno: Message - 73rd Inaugural Meeting of the Management Association of the Philippines Message by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), at the 73rd Inaugural Meeting of the Management Association of the Philippines, Manila, 12 January 2022. * * * Good afternoon to everyone. Thank you for inviting me to be your guest speaker and inducting officer for the 73rd Inaugural Meeting of the Management Association of the Philippines. Let me congratulate the 2022 MAP Board of Governors, led by Mr. Alfredo E. Pascual. Thank you for accepting the duties and responsibilities of leading this important organization. Since its inception in 1950, MAP has promoted management excellence for nation-building, and I laud MAP for delivering on this critical mission during this difficult time and supporting efforts toward economic recovery and sustainability. Let me begin with the economic outlook. Amid the health crisis, we have begun to see the dawn of recovery. Bright spots have emerged. After five consecutive quarters of negative growth, the economy bounced back with growth of 12.0 percent in the second quarter of 2021 followed by 7.1 percent in the third quarter. Labor conditions have improved, with the unemployment rate declining to an 11-month low of 6.5 percent last November, from the peak of 17.6 percent in April 2020. Inflation decelerated to 3.6 percent last December. This brought the average inflation for 2021 to 4.5 percent, above the official target range of 2.0 to 4.0 percent. For this year and next, we see inflation easing back to within the target range. The country’s gross international reserves remain hefty at $107.7 billion as of end-November 2021, equivalent to 10.2 months’ worth of imports of goods and payments of services and primary income. Cash remittances from overseas Filipinos continue to be a reliable source of foreign exchange, growing by 5.3 percent to USD25.9 billion in January to October last year, from a slight contraction in 2020. For the first 16 months, Foreign Direct Investments net inflows rose by 48.1 percent to US$8.1 billion, up from US$5.5 billion in the previous year. Meanwhile, the peso appreciated to an average of P49.3/$1 in 2021 from 49.6/$1 the previous year. The Philippine banking system has remained sound amid the COVID-19 pandemic. The banking system’s total resources grew year-on-year by 6.6 percent to P20.1 trillion as of end-October 2021. Asset expanded by 8.6 percent to P15.6 trillion, funded mainly by deposits, reflecting continued trust and confidence of the public in the banking system. Bank lending has improved. As of end-October 2021, banks’ total loan portfolio expanded yearon-year by 3.3 percent to P11.0 trillion. Non-performing loans ratio remained manageable at 4.4 percent over the same period. 1/3 BIS central bankers' speeches Banks remained profitable, recording an annualized net profit growth of 8.5 percent last year. Capitalization remained ample, with the capital adequacy ratio staying well above the BSP’s 10 percent minimum requirement and the 8 percent prescribed by the Bank for International Settlements. Liquidity buffers stayed sufficient, with the liquidity coverage ratio of universal and commercial banks above the 100 percent minimum threshold. While the COVID-19 crisis has brought challenges, it helped accelerate financial digitalization and inclusion. More people started to embrace digital payment platforms and created electronic financial accounts. Even before the pandemic, we launched the Digital Payments Transformation Roadmap with the twin goals to first, digitize at least half of the total volume of financial transactions and second, have at least 70 percent of Filipino adults owning transaction accounts by 2023. To help achieve these goals, we have implemented the digital banking framework, which provides the rules for the establishment of digital banks. In addition, we created the open finance framework, which provides the rules for consent driven use of information for the development of financial instruments that cater to the needs of customers. We are also exploring the digital financial marketplace model, which will allow bank and non-bank players to forge strategic partnerships in enabling consumers to access financial products and services through a one-stop shop platform. We also launched QR Ph, which has two use-cases: QR Ph person-to-merchant or P2M and QR Ph person-to-person payment or P2P. QR Ph P2M can help scale the services provided under QR Ph, and empower micro, small, or even informal merchants such as sari-sari store owners, wet market vendors, or tricycle drivers. Against this backdrop, the Bangko Sentral has heightened its cyber security efforts. We have intensified cyber-surveillance efforts and reinforced collaboration and information sharing with key stakeholders. We are also working on enhancements to existing regulations on fraud risk management and consumer protection to better safeguard consumers against cyber risks. This brings me to our next equally important agenda: championing sustainability in the financial system. In 2019, we included sustainability as a strategic thrust by launching the Sustainable Central Banking Program where BSP enables, mobilizes, and promotes the sustainability agenda. As enabler, the BSP has issued regulations on the Sustainable Finance Framework that banks must adhere to. In a nutshell, the Framework emphasizes the tone from the top and sets out the duties and responsibilities of the board of directors in changing the strategic thrust and embedding risk consciousness within the organization. This highlights that management, indeed, has a big role to play embedding sustainability principles in our organizations. And as the MAP, I hope you can help us drive this point across. On our end, the Bangko Sentral and other financial sector supervisors will continue to harmonize regulations and align expectations in the promotion of sustainable finance. This program is 2/3 BIS central bankers' speeches consistent with the Sustainable Finance Roadmap of the Green Force—an interagency government body tasked to promote sustainable finance that the Bangko Sentral co-chairs with the Department of Finance. Walking the talk, the Bangko Sentral has invested USD 550 million in the BIS Green Bond Fund since 2019. We have implemented green initiatives that aim to influence the behavior of employees and highlight the importance of individual actions in achieving our goals. An example is the “no single use plastic bottle policy.” These are complemented by projects showing the BSP’s actions and policy direction. These include the installation of energy-efficient mechanisms such as solar panels, adoption of paperlite policy, and initiatives to secure the BERDE certification for our buildings. The new BSP Complex in New Clark City is envisioned to become a smart, green, and modern facility that balances efficiency and environmental sustainability. For our currency production, we have decided to use polymer banknotes to make sure that the notes are high quality, long-lasting, difficult to counterfeit, resistant to dirt and moisture, and most importantly, environment-friendly with lower carbon footprint than paper. Finally, the pandemic has highlighted the quality of governance in financial institutions. The past 21 months showed us the quality of oversight of the board of directors and the robustness of risk management systems of financial institutions, enabling them to quickly resume business operations and deliver financial services even amid the pandemic. The corporate and risk governance reforms implemented by the Bangko Sentral to embed a culture of excellence and good governance among supervised financial institutions helped the Philippine banking system withstand the pandemic. In closing, allow me to share how the Bangko Sentral is working toward a safe, sound, and resilient financial system, captured in the acronym RING: R stands for Risk management guidelines which are continuously enhanced to be responsive to changing environment I is Integrity in the financial system and investor confidence, which we espouse. N or New technologies that must be adapted to provide innovative financial products and services, and lastly G or Governance standards, which must be continuously strengthened, reinforcing sound culture and conduct of supervised financial institutions. All that said, I hope MAP can also use these same principles in promoting management excellence in your respective organizations. 3/3 BIS central bankers' speeches	central bank of the philippines	2,022	1
Opening statement by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), during the Senate Deliberation on the Proposed Financial Consumer Protection Act, Manila, 16 January 2022.	Benjamin E Diokno: Proposed Financial Consumer Protection Act Opening statement by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), during the Senate Deliberation on the Proposed Financial Consumer Protection Act, Manila, 16 January 2022. * * * Introduction 1. Sen. Grace Llamanzares-Poe, Chairperson of the Senate Committee on Banks, Financial Institutions and Currencies, Senators and members of the Committee, fellow public servants from the Cooperative Development Authority, Insurance Commission, and Securities and Exchange Commission, and other concerned agencies and stakeholders, good morning. We thank you for your support to the Bangko Sentral ng Pilipinas’ initiatives, including the Financial Consumer Protection Act or the “FCP Act”. We likewise thank the Senators who filed a version of the FCP Act, and to all market players, who continue to support this priority legislative measure. Necessity and Urgency of the FCP Act 2. The FCP Act will protect every Juan and Maria making financial transactions — whether it is making deposits to save for their children’s education, taking a loan to grow their businesses, sending money to friends and family, or paying goods online. The Act will benefit us all because we are all financial consumers. 3. Without this Act, we will continue to hear stories like Johnny’s — a father of two young children and an economic front-liner, who lost his hard-earned savings after a fraudster obtained his account information and made unauthorized fund transfers; or Marianne’s — a small business owner, who was billed with an increased amortization on her loan account. She disputed the reasonableness of the fees and charges, but lost to the financial institution in the end. These are real stories. They are based on actual complaints that BSP received. In fact, these two cases were among the 42,456 complaints elevated to the BSP Consumer Assistance Mechanism for 2020 and 2021. Declared amounts in the complaints received in 2021 alone add up to about 540 million pesos; from 2019 to 2021, the cumulative total amounted to two billion pesos. A majority of these cases have been deemed closed. But the process was long and arduous. And for many complaints the resolutions were unfavorable to the consumer. Over the same period, fellow regulator, the Insurance Commission, received and processed 2,992 complaints against insurance and pre-need companies and HMOs. The Securities and Exchange Commission also received hundreds of investment scam complaints within 2019 and 2020. These cases could be resolved quickly once the FCP Act is in place. This Act will empower financial regulators such as the Bangko Sentral ng Pilipinas, the Insurance Commission, the Securities and Exchange Commission, and the Cooperative Development Authority to expedite the adjudication of reasonable monetary claims more efficiently, fairly and openly, all to the benefit of the consumers. 4. One of the positive unintended consequences of the COVID pandemic has been the dramatic rise in the use of digital financial services. But the surge brought with it graver risks. In fact, complaints related to the use internet banking and mobile banking account for 45.2 percent of the 1/3 BIS central bankers' speeches total complaints in 2021. Hackers and scammers took advantage of the digital infrastructure and consumer vulnerability to perpetrate crime. Based on BSP monitoring, the increased use by the public of digital financial services has given rise to a wave of cyber and financial crimes. In 2020, hacking and other malware attacks surged by a whopping 2324 percent from the previous year, while phishing and other social engineering schemes increased 302 percent from 2019. Over the same period, account takeover or identity theft rose 2.5 percent, while Card Not Present fraud fell 26.8 percent. Taken together, the top three cybercrimes in 2020 were first, account takeover or identity theft; second, phishing and other social engineering schemes; and third, Card Not Present fraud. Notably, skimming and ATM-based cyber fraud losses significantly declined from 2018–2021 due to the implementation of EMV chip technology, but fraud actors were quick to shift their tactics. Clearly, all of us as financial consumers, are exposed to various risks, frauds and cyber threats that could result in loss of income. Worse, it could result in loss of confidence in the financial system. 5. Should there be a loss of confidence in the financial system, consumers might opt to keep their savings and investments away from the formal financial system – thus undermining the financial system’s ability to intermediate and facilitate the flow of funds to productive sectors of the economy. 6. The enactment of the FCP Act is envisioned to provide an armor of protection to all financial consumers. It will ensure that relevant government institutions and financial regulators will be fully equipped with the legal authority to enforce prudent, responsible, and customer-centric standards of business conduct. The passage of the FCP Act will enable financial regulators to sanction business practices and entities that pose grave and irreparable injury to financial consumers. It will deter frauds and scams, and ensure that every Juan and Maria are provided with positive customer experiences. FCP Act Features Overview 7. Now, let me talk about the salient features of the FCP Act. The Act covers the full range of financial products and services offered by the banking, insurance, payments and fintech industries. Even investment advisory services are covered. Aligned with international standards, the Act strengthens the oversight and enforcement powers of financial regulators to address current weaknesses of existing laws, rules, regulations. The Act grants regulators with authority to determine the reasonableness of fees and charges; suspend erring employees; revoke licenses of erring financial institutions; and impose sanctions to ensure compliance with the intent of its provisions. 8. Most importantly, the Act provides financial consumers with new, immediate, and efficient avenues for redress by granting financial regulators with adjudicatory authority to conduct hearings on consumer complaints. This proposed measure provides alternate, less cumbersome, legal recourse for financial consumers. Consumer complaints can be escalated and resolved at the level of the financial regulators, ensuring quick resolutions, hence de-clogging court dockets. Existing courts may then focus on more pressing matters. 9. The passage of the FCP Act is not only a matter of necessity, it is an issue of urgency. As mentioned earlier, as financial products and services continue to rise, so do risks. And we, policymakers, cannot stand idly by while the Juans and Marias continue to suffer from the limitations of our existing laws. 2/3 BIS central bankers' speeches 10. Without doubt, if properly and swiftly implemented, the FCP Act will reinforce the trust and confidence of the public in the financial system, and in the government’s ability to uphold consumer welfare. 11. We look forward to this Committee’s —and the Senate’s —full and continued support to the enactment of the Financial Consumer Protection Act as a priority measure. Thank you very much. 3/3 BIS central bankers' speeches	central bank of the philippines	2,022	1
Message from Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), at the Launching of PESONet Multiple Batch Settlement, Manila, 23 January 2022.	Benjamin E Diokno: Message during the Launch of PESONet Multiple Batch Settlement Message from Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), at the Launching of PESONet Multiple Batch Settlement, Manila, 23 January 2022. * * * A pleasant afternoon to everyone! Let me begin by congratulating the Philippine Payments Management, Inc. (PPMI), the PESONet MBS team, the Philippine Clearing House Corporation (PCHC), stakeholders in the payments industry and colleagues from the BSP’s Payments and Currency Management Sector for achieving yet another milestone in Philippine retail payment system development: the launch of PESONet multiple batch settlement service or PESONet MBS. About a decade ago, retail payments in the country was dominated by physical cash or checks. To encourage e-payments adoption, the BSP, together with PPMI, embarked on strategic initiatives in building a safe, efficient, reliable, and inclusive payment system. These joint projects were pursued as part of the National Retail Payment System Framework under which PESONet was established. These proactive efforts to lay down interoperable digital payment rails prior to the COVID-19 pandemic turned out to be crucial. Digital channels made it possible to carry out essential transactions of households, businesses and the government in the face of mobility restrictions. In fact, a growing volume of pension, social security benefits and government aid have been disbursed digitally through PESONet. In 2021, the value of SSS disbursements coursed through PESONet reached P158.47 billion and there is room for further growth with the launch of these digital initiatives. The numbers showing the use of digital payments and those with financial accounts are encouraging. The BSP exceeded its target of digitalizing a fifth of retail payments by end 2020. Along with higher digital payments usage, we also expanded financial inclusion with the increased number of Filipinos who opened e-money accounts. By the first quarter of 2021, more than half or 53 percent of Filipino adults own a transaction account in a financial institution, a sharp increase from only 29 percent back in 2019. Today, we welcome another landmark achievement with the launch of the PESONet Multiple Batch Settlement – an improvement that allows more frequent settlement of PESONet fund transfers, from one to two cycles within a banking day. PESONet recipients will now be able to receive funds at an earlier time than the usual end of banking day. With this enhanced feature, we hope that consumers will be incentivized to use PESONet for greater convenience, faster settlement, and better liquidity management. This enhancement also stands to improve person-to-government payments made through EGov Pay, which is another facility that runs through the PESONet. With PESONet MBS, payments for taxes, permits, fees, and other obligations to the government using EGov Pay will be faster. As more Filipinos embrace digital payments, we are optimistic that PESONet MBS would bring 1/2 BIS central bankers' speeches us closer to our strategic objectives under the BSP’s Digital Transformation Roadmap: namely, first, digitalizing 50 percent of retail payments volume, and second, onboarding 70 percent of adult Filipinos to the formal financial system by 2023. They say, “teamwork makes the dream work.” Hence, I would like to commend our partners in the payments industry for helping us turn this vision into reality. Despite the challenges from the pandemic, we, at the BSP, remain committed to closely collaborate with the various stakeholders in the payments industry, as well as in the public and private sectors to deliver safe, convenient and responsive digital payment services that help our fellow countrymen thrive in the New Economy. Together, let us continue to work towards achieving our shared goal of building a vibrant and inclusive digital Philippine economy where every Filipino can have meaningful participation. Once again, congratulations to all the men and women who worked tirelessly to make the PESONet MBS launch a success! 2/2 BIS central bankers' speeches	central bank of the philippines	2,022	2
Opening remarks by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), during the Signing of the Multilateral MOU on Establishment of Supervisory College for Financial Conglomerate Supervision, Manila, 24 January 2022.	Benjamin E Diokno: Opening remarks during the signing of the establishment of a supervisory college for financial conglomerate supervision Opening remarks by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), during the Signing of the Multilateral MOU on Establishment of Supervisory College for Financial Conglomerate Supervision, Manila, 24 January 2022. * * * Good morning. It is my pleasure to welcome our Financial Sector Forum Principals, Emilio Aquino, Chairman of the Securities and Exchange Commission; Dennis Funa, Commissioner of the Insurance Commission; and Sandra Diaz, Senior Vice President of the Philippine Deposit Insurance Corporation to witness another momentous event for the Forum. In line with the principles for the supervision of financial conglomerates of the Basel Committee on Banking Supervision, the Financial Sector Forum created the Financial Conglomerate Supervision Committee which is tasked to work towards identifying conglomerate risks in the financial system; and to plan ahead supervisory initiatives to mitigate conglomerate risks. The Basel Principles highlight, among others, the need for a clear legal framework that provides supervisors with the necessary powers, authority and resources to perform, with independence and in coordination with other supervisors, comprehensive group-wide supervision. The Principles re-affirm the importance of supervisory cooperation, coordination and information exchange. In the 2020 Financial Sector Assessment Program Technical Note on Supervision and Regulation of Financial Conglomerates, the International Monetary Fund recommended the implementation of a multilateral agreement among Financial Sector Forum member agencies on the establishment of Supervisory College to agree on the approach of group level risk assessment for financial conglomerates. The establishment of a Supervisory College is an important regulatory platform in achieving effective and efficient supervision of financial conglomerates. It is also an international practice amongst international financial supervisory authorities. Thus, this Memorandum of Understanding shall govern the establishment of an inter-agency cross-sectoral Supervisory College which shall serve as the forum, to facilitate cooperation and coordination between and among the Financial Sector Forum member agencies specifically, for the supervision of financial conglomerates in the Philippines. This supports a clear process for coordinating various roles and responsibilities of the Financial Sector Forum with clearly delineated responsibilities for effective supervision. As such, we would like to re-affirm the spirit of collaboration by signing the Memorandum of Understanding on the Establishment of Supervisory College for Financial Conglomerate Supervision. Finally, let me share a quote from the American industrialist and business magnate, Henry Ford. He said that â€œComing together is a beginning, staying together is progress, and working together is success. If everyone is moving forward together, then success takes care of itself." Congratulations to the Financial Sector Forum member agencies for taking this step to improve 1/2 BIS central bankers' speeches the supervision of financial conglomerates in the Philippines for the benefit of the Filipino people. Thank you and good morning! 2/2 BIS central bankers' speeches	central bank of the philippines	2,022	2
Speech by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), at the 16th J.P. Morgan Philippine Conference 2022, virtual, 26 January 2022.	Benjamin E Diokno: Tracking the Philippines’ economic recovery Speech by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), at the 16th J.P. Morgan Philippine Conference 2022, virtual, 26 January 2022. * * * Good day, everyone. I hope you are all safe and well. I thank JP Morgan for inviting me to speak in this virtual event. Despite the challenges of the ongoing crisis, the Philippine economy remains on the strong recovery path. Allow me to give you an overview of the Philippine economy from the lens of the Bangko Sentral ng Pilipinas (BSP). The gradual reopening of economies and progress in vaccine rollout, 2021 shaped up to be a year of global recovery. However, the global recovery came with challenges, including sluggish and uneven distribution of vaccines. The emergence of new COVID-19 variants also forced governments to reimpose restrictions to contain the virus. Against this backdrop, the Philippine economy grew by 12.0 percent in the second quarter of 2021 and by 7.1 percent in the third quarter. The faster-than-expected expansion in the third quarter was driven by the industry and services sectors. In contrast, the agriculture sector contracted, owing to weather disturbances and the African swine fever that affected livestock. The nationwide rollout of the alert level system, which permitted interzonal and intrazonal travels covering places in lower alert levels, contributed to higher mobility and improved business activities in November and December 2021. The recovery in business activity led to improved employment indicators. Some jobs lost in the earlier periods of the pandemic were gradually recovered, with total employment in October 2021 already exceeding pre-pandemic levels. However, high-contact industries, such as accommodation, food service activities, and transportation and storage continued to record job losses. Moreover, granular data show that quality of jobs has yet to fully recover. The BSP’s accommodative monetary policy and extraordinary measures ensured adequate liquidity in the financial system and helped bolster domestic economic activity amid the pandemic. Bank lending appears to have slowly turned the corner in recent months. It grew for the fourth straight month in November, up by 4.0 percent year-on-year from 3.5 percent in October. This came with optimistic economic outlook of businesses in response to rising vaccine rollout and easing of restrictions in the latter part of 2021. Meanwhile, inflation further eased in December 2021. On an annual basis, inflation for food, 1/4 BIS central bankers' speeches alcoholic beverages and tobacco, and non-food items continued to slow down in December owing to easing supply constraints. However, prices of electricity, gas, and other fuels further increased amid elevated global prices of crude oil and coal. Core inflation, which excludes volatile food and energy prices, likewise declined in December as supply-side price pressures abated. Targeted non-monetary measures by the national government helped ease the pressures from supply-side factors. The consecutive quarters of positive year-on-year economic growth point to prospects of sustainable recovery. Nevertheless, with recovery still in its nascent stage, the BSP is keen to maintain policy support for the economy. We will properly time our exit strategy as withdrawing support either too early or too late may have undesirable consequences to the economy. To date, the BSP’s liquidity-easing measures in response to the pandemic amount to 12 percent of GDP. The prevailing monetary policy stance is supported by a manageable inflation outlook and anchored inflation expectations. Based on our latest baseline forecasts, inflation is seen to settle at 3.4 percent in 2022 and 3.2 percent in 2023, well within the official target range of 2.0 to 4.0 percent. However, risks to the inflation outlook appear to be slightly on the upside for 2022 but remain broadly balanced for 2023. Over the near term, major upside risks include increase of global nonoil commodity prices due to strong global demand. Additionally, we continue to monitor the developments surrounding Typhoon Odette to determine if it will have secondary effects on inflation. Meanwhile, results of the BSP’s survey of private sector economists conducted in December 2021 showed steady mean inflation forecasts at 3.5 percent for 2022 and 3.1 percent for 2023. The domestic economy is expected to rebound stronger this year. The interagency Development Budget Coordination Committee (DBCC) sets its 2022 GDP growth assumption to a range of 7.0 to 9.0 percent from 5.0 to 5.5 percent last year, taking into account continued recovery prospects as more people get vaccinated and as more businesses rebound from the pandemic. Meanwhile, overseas Filipino remittances are seen to have reached a new record high of US$31.7 billion in 2021 from US$30.1 billion in 2019. But there are risks to the strong recovery prospects. The emergence of highly transmissible COVID-19 variants could delay the normalization of economic activities. While vaccines have helped lessen severe COVID-19 cases and lower hospitalizations, the reduced efficacy of existing vaccines against more virulent COVID-19 variants may force governments to reimpose stricter lockdown measures to prevent rapid spread of infections. These restrictions, if prolonged, could impede the global economy’s recovery in the first half of 2022. 2/4 BIS central bankers' speeches Nonetheless, in the case of the Philippines, the timely imposition of quarantine restrictions may help control COVID-19 surges and arrest the spread of the more transmissible Omicron variant. On the external front, the ongoing policy normalization by major central banks could affect capital flows and heighten volatility in financial markets. On the positive side, the policy normalization of advanced economy central banks may provide opportunities for economies like the Philippines in terms of increased trade activities. We expect the Philippine economy’s growth trajectory to improve further owing to the projected expansion of exports in 2022. From Q1-Q3 2021, goods exports grew by 16.0 percent owing to the recovery in demand from our major trading partners. Electronic products account for more than half of the country’s total exports. And we expect exports of electronic products to increase as demand for semiconductors and other electronic components rises owning to more extensive global digitalization efforts across multiple sectors. Also lending support to the improved export outlook are higher commodity prices in mineral and agro-based products, and an increase in domestic production capacity. The normalization of the presently highly accommodative monetary policy in advanced economies is expected to cause a rebalancing of global capital flows and depreciation of emerging markets’ currencies vis-à-vis the dollar. While such a move could potentially affect all emerging economies, the effect on each individual economy will be uneven. Our assessment is that the Philippines is in a favorable position to navigate this tightening of global financial conditions given its manageable inflation environment and sufficient external buffers. The current level of gross international reserves (GIR) of USD109 billion is more than sufficient to withstand adverse external shocks. Structural flows from overseas Filipino remittances, IT-BPM revenues, and foreign direct investments can be counted on to further boost the country’s external payments position. Meanwhile, the BSP’s market-determined exchange rate system and macroprudential measures will continue to curb excessive foreign exchange volatility and help maintain order in the financial markets. The timing and conditions under which the BSP will unwind its pandemic interventions will continue to be guided by the inflation and growth outlook over the medium term and the risks surrounding such outlook. Consistent with the BSP’s data-dependent approach to policymaking, the BSP will continue to monitor the evolution of various domestic factors, including liquidity and credit dynamics, financial sector risks, and the state of public health, as well as emerging global developments and potential spillovers. In closing, let me to summarize the key messages of my presentation: First, the global economy began its recovery path in 2021, but this was subdued in large part by the emergence of new COVID-19 variants and the uneven vaccination rollout across and within economies. Second, despite the slowdown in global economic recovery, the Philippine economy remains on 3/4 BIS central bankers' speeches track to recover its pandemic losses, underpinned by strong macroeconomic fundamentals and expectations of higher domestic and foreign demand as well as stable inflation outlook. And third, the BSP remains steadfast in its commitment to provide appropriate policy support to ensure a sustainable path to economic recovery. When developments warrant a scale-down of policy support as economic recovery gains traction, the BSP will ensure a smooth transition in winding down its time and state-bound measures. The BSP will strike a delicate balance between providing adequate stimulus to the economy and preventing the buildup up inflationary pressures and risks to financial stability. Thank you for your attention. Deputy Governor Francis Dakila will be sharing the BSP’s thoughts in greater detail during the Q&A. I look forward to meeting you all in person in our future engagements. 4/4 BIS central bankers' speeches	central bank of the philippines	2,022	2
Message from Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), at the Launch of the National Strategy for Financial Inclusion 2022-2028 and Financial Inclusion Logo, Manila, 27 January 2022.	Benjamin E Diokno: Launch of the National Strategy for Financial Inclusion 2022-2028 Message from Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), at the Launch of the National Strategy for Financial Inclusion 2022-2028 and Financial Inclusion Logo, Manila, 27 January 2022. * * * To the members of the Financial Inclusion Steering Committee or FISC; key stakeholders and partners; financial inclusion advocates and champions; members of the Monetary Board; esteemed colleagues and guests; ladies and gentlemen: good afternoon. It is my privilege to welcome you all to the launch of the National Strategy Financial Inclusion 2022–2028. When we launched the original National Strategy for Financial Inclusion or NSFI on July 1, 2015, we set out to define what financial inclusion meant in the Philippine setting.We laid out the fundamental principles that would guide our vision and action in bringing more Filipinos into the formal financial system. We take pride in knowing that through the guidance of the FISC and the contributions of our stakeholders, much has been accomplished in nearly seven years of NSFI implementation.Together, we have enhanced the breadth and depth of our outreach to the unbanked and underserved through several initiatives. These initiatives have been instrumental in broadening access to essential financial products and services and, in turn, have uplifted lives by giving the poor the means to protect and grow their livelihoods, improve their well-being, and ultimately, take greater control of their future. Through our efforts, having a transaction account, obtaining a loan, investing, and purchasing insurance, are now more accessible to the man on the street, market vendor, tricycle driver, farmer, fisherman, and sari-sari store owner. We have also set the pace for innovation and other critical undertakings, including the implementation of the national ID system or PhilSys, as well as the digitalization of social protection benefits and financial services to the public. However, there is more work to be done.The paramount vision of financial inclusion, after all, is to foster sustainable, broad-based growth that promotes shared prosperity and opportunities.Access to financial products and services must not only be broad, but also meaningful in a sense that it opens up opportunities for the man on the street to move up in life. While account ownership grew over the last 4 years from the launch of the NSFI in 2015, the 2019 Financial Inclusion Survey showed that 71% or an estimated 51 million remain unreached by the formal financial system. With these realities and other significant developments transforming the country’s financial inclusion landscape, our vision and strategy must evolve to reflect new exigencies, demands, and opportunities. The NSFI 2022–2028 signifies our greater collective commitment and aspiration for a more financially included and empowered citizenry. It takes a deliberate stance to address the significant disparities in financial inclusion levels across demographics and segments. The NSFI 2022–2028 emphasizes financial inclusion to enhance consumer welfare and features financial resilience as a centerpiece of our renewed vision.It outlines a strategic governance framework, through which a broader set of stakeholders can be tapped as a driving force of the 1/2 BIS central bankers' speeches Strategy’s implementation and, thus, truly foster a whole-of-nation approach. By articulating concrete desired outcomes, priorities, performance indicators, and targets, this landmark document will not only serve as a financial inclusion blueprint for the next six years, but also as powerful tool for communicating our bold commitment to the financial inclusion agenda. At this point, I would like to thank and commend my fellow FISC members and our stakeholders for your recognition of financial inclusion as an essential component of our country’s development master plan. Your contributions have truly been invaluable to the development of the NSFI 2022–2028. The effective implementation of the NSFI 2022–2028 will, of course, rely on everyone’s unwavering dedication and zeal. We must work to ensure all Filipinos can thrive and prosper in an ever-evolving landscape. This is also why we chose the social media hashtag #KabilangAko, to send a clear message that no one will be left behind. Finally, today’s launch merely heralds the continuation of our financial inclusion journey, one that is to be pursued with even greater purpose: to open opportunities for every Filipino to become both the beneficiaries and foundations of growth and prosperity.We look forward to being with you on this journey. Thank you again for joining us on this momentous occasion as we unveil the NSFI 2022– 2028. Maraming salamat at mabuhay! # 2/2 BIS central bankers' speeches	central bank of the philippines	2,022	2
Speech by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), at the Philippine Economic Briefing 2022, Manila, 30 January 2022.	Benjamin E Diokno: The Philippine economy post-COVID-19 moving steadily towards recovery Speech by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), at the Philippine Economic Briefing 2022, Manila, 30 January 2022. * * * Good day, everyone. I hope you are all safe and well. Thank you to Daiwa Securities Group for allowing me to share updates on the economy and how we plan to maintain our strong growth momentum. I am pleased to present to you latest developments in the Philippine economy. After five consecutive quarters of negative growth, the Philippine economy maintained its positive momentum and grew 7.7 percent in the fourth quarter of 2021. This brings the full-year GDP growth figure to 5.6 percent. The full-year print exceeds the government’s revised forecast range of 5 to 5.5 percent, giving us even more confidence of even brighter recovery prospects. Labor conditions have improved. In November 2021, the country’s unemployment rate, down from a peak of 17.6 percent in April last year, fell even further to 6.5 percent, the lowest since January 2021. Employment gains for the month have occurred mainly in the services sectors, particularly in public administration and defense, as well as wholesale/retail trade; and in fishing and aquaculture. Meanwhile, the country’s year-on-year headline inflation further decelerated to 3.6 percent in December 2021 from 4.2 percent in November 2021, bringing the year-to-date average inflation to 4.5 percent. This is slightly above the Government’s inflation target range of 2.0-4.0 percent for 2021. The slowdown in December 2021 inflation supports the BSP’s assessment that inflation would decelerate to within the target range over the policy horizon. Meanwhile, the Development Budget Coordination Committee (DBCC) decided to retain the current inflation target range at 3.0 percent ± 1.0 percentage point for 2022–2024. The prevailing policy stance is also supported by a manageable inflation outlook and anchored inflation expectations. Based on our latest baseline forecasts, inflation is seen to settle at 3.4 percent in 2022 and 3.2 percent in 2023, well within the government’s target range of 2 to 4 percent. We expect liquidity in the financial system to remain adequate in supporting credit activity and a broad-based economic recovery. M3 expanded by 8.2 percent year-on-year to P14.8 trillion in November 2021, unchanged from the growth rate (revised) recorded in October 2021. Overall liquidity conditions thus continue to provide support for domestic economic activity. The various liquidity-easing measures of BSP have injected the equivalent of 12.0 percent of GDP into the financial system. Meanwhile, outstanding loans of universal and commercial banks (U/KBs), net of reverse repurchase (RRP) placements with the BSP, increased at a faster rate of 4.0 percent year-onyear in November 2021 from 3.5 percent in October 2021. Moving on to banking sector developments… 1/4 BIS central bankers' speeches Philippine banks have shown resilience to the COVID-19 crisis, benefiting from risk-management and other regulatory reforms of the past two decades. Banks have ample buffers against shocks. Capital adequacy ratio (CAR) is at 17.6 percent, well above the 8.0 percent prescribed by the Bank for International Settlements (BIS) and the BSP’s 10.0 percent minimum requirement. Exposure to bad debts remains manageable. Average non-performing loans (NPL) ratio stood at 3.9 percent as of end-November this year, much lower than the double-digit figures in the aftermath of the Asian financial crisis. The implementation of the FIST Act, signed earlier this year, is projected to reduce average NPL ratio of the banking system by 0.6 to 5.8 percentage points for the years 2021 to 2025. The exchange rate movements remain broadly in line with the country’s long-run macroeconomic fundamentals. In 2021, the foreign exchange market was supported mainly by positive market sentiment as the economy continued to show signs of recovery amid the pandemic. The BSP has held to its long-standing approach of keeping the exchange rate market-determined and taking measures only to ensure orderly market conditions and reduce excessive short-term volatility in the exchange rate that may impact on inflation and inflation expectations. Looking ahead in the year, the peso is expected to remain stable, supported by structural inflows from exports, overseas Filipino remittances, BPO receipts, and foreign direct investments. Meanwhile, the country’s external sector continues to provide sufficient buffers to ward off the potential adverse effects of external headwinds. Our gross international reserves (GIR), which stood at US$108.9 billion as of end-2021, continue to provide ample cushion against unforeseen demand for FX liquidity. The GIR level is equivalent to 10.3 months’ worth of imports of goods and payments of services and primary income. It is also about 6 to 9 times the country’s short-term external debt based on residual and original maturity, respectively. Amid the strong rebound in external demand in key trade partners, the country’s exports of goods increased by 16 percent in January to September 2021. Meanwhile, following the gradual resumption of domestic economic activities and restocking of inventories, imports of goods grew at a much faster rate of 30.2 percent in the same period. This resulted in a wider trade deficit at US$36.6 billion and has caused the overall BOP position to reverse to a deficit of US$665 million in the first nine months of 2021 from a US$6.9 billion surplus in the same period last year. The country’s external sector has remained supported by structural FX flows from overseas Filipino remittances, business process outsourcing receipts, and foreign direct investments. Cash remittances from overseas Filipinos (OFs) are steadily flowing in with a 5.2 percent growth posted in January to November 2021, from a slight contraction in 2020. Meanwhile, BPO services exhibited strong recovery in the same period at 8.3 percent as the sector was quick to adjust to the new normal work set up. Net foreign direct investments (FDI) in January to October 2021 increased by 48.1 percent due to positive foreign investor sentiment and improving confidence on the country’s growth prospects. This bodes well for job creation. 2/4 BIS central bankers' speeches Moreover, favorable external debt profile acts as a cushion against external shocks. External debt-to-GDP ratio settled at 27.3 percent as of end-September 2021 compared to about 60.0 percent in mid-2000s. Given that bulk of the country’s external debt have medium and long-term maturity, and are fixed interest rate bearing, debt repayment schedule is more manageable and financially sustainable over the medium to long term. Considering recent economic developments and significant progress in mass vaccination, we are optimistic that there is sufficient support for the country’s recovery this year and in the near term. The management of risks, the expected revitalization of key industries from government policy support and structural reforms, as well as the resumption of global economic activities should help the Philippine economy move towards a steady recovery path. The latest projections as of the 16 December 2021 monetary policy meeting indicate that average inflation is likely to ease towards the midpoint of the target range in 2022, at 3.4 percent, and 2023, at 3.2 percent. OF cash remittances are seen to increase, while receipts from BPO services are expected to rise as host economies open further and access to digital financial services is enhanced. Inflows of foreign direct investments (FDIs) are seen to climb as the domestic and global investment climate improves. Moving forward, the BSP’s actions and policy thrusts will continue to be anchored on its core mandates of promoting price and financial stability. On monetary policy: the BSP will remain vigilant over the current inflation dynamics to ensure that the monetary policy stance continues to support economic recovery to the extent that the inflation outlook would allow. It will carefully scan the operating environment with a forwardlooking perspective to move in a pre-emptive fashion to address any risks to our price stability mandate. On the financial sector: the BSP will intensify its monitoring and surveillance over its supervised institutions to ensure that they remain responsive to emerging risks and to promote the continued soundness, stability, resilience and inclusivity of the banking system, particularly through the pursuit of enhanced digitization. Finally, on the external sector: the BSP will remain supportive of policies that will help strengthen the economy’s resilience to external shocks, including that of maintaining a market-determined exchange rate, keeping a comfortable level of reserves, and keeping the country’s external debt manageable. In closing, I leave you with three key takeaways: First, the Philippines’ economic fundamentals remain solid, and these will carry us through full recovery. The national government will continue to implement measures that will balance the twin goals of saving livelihoods and saving lives. Second, BSP will keep its policy settings and regulatory relief measures supportive of the economy as needed; withdrawal of policy measures will only be done once full recovery is underway. Lastly, the BSP remains one with the government and the Filipino people in dealing with this crisis head on and in pushing the economy toward full recovery. The accelerated vaccination program, implementation of economic recovery measures and pursuit of key structural reforms will help lessen the long-term scarring effects of the pandemic and ensure a robust growth 3/4 BIS central bankers' speeches trajectory for the economy. Thank you for your attention. 4/4 BIS central bankers' speeches	central bank of the philippines	2,022	2
Speech by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), at the Launch of Financial Stability Report for the 2nd Semester of 2021, Manila, 1 February 2022.	Benjamin E Diokno: Managing risks, sustaining momentum, improving lives Speech by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), at the Launch of Financial Stability Report for the 2nd Semester of 2021, Manila, 1 February 2022. * * * Ladies and gentlemen, friends from the media, good morning. Thank you for joining the Financial Stability Coordination Council for the Financial Stability Report for the 2nd Semester of 2021. A few days ago, Q4 2021 Year-on-Year growth was reported to be at 7.7 percent, putting the full year expansion at 5.6 percent. This is a remarkable turnaround from what we experienced in the first year of Covid-19. For financial authorities, we welcome these gains, humbly recognizing that there will always be improvements we can pursue, while maintaining a watchful eye over changing market conditions. In thinking of where our market stands, I am reminded of Niccolo Machiavelli, the Italian philosopher and statesman to whom this quote was first attributed. He once said, and I quote “never let a crisis go to waste”, unquote. His idea cannot be more apt than today. While this pandemic has been a heavy burden, it has provided us the opportunity to come together and take collective action. Now that we have our growth momentum back, we can pause, to take the opportunity to learn from this crisis. In previous FSRs, we described how quickly we all came together. Faced with an unprecedented crisis, we took unconventional measures to respond to an out-of-the-box challenge. In this FSR, we talk about what we have learned from Covid. For financial authorities, it is and will always be about the financial system as a whole and that whole has to be appreciated as being more than the sum of its parts. We also talk about how we can be better, addressing some of more immediate challenges that have come up because of Covid. It is about the welfare of the Filipino, seen through the lens of public health, through access to goods, through socio-economic equity, and through a greener future environment. All of these are in this latest FSR. We invite all of you to access and download your copy which will be available in the websites of the FSCC member agencies.As always, we look forward to hearing your thoughts and comments. Again, thank you for joining us today and good morning. 1/1 BIS central bankers' speeches	central bank of the philippines	2,022	2
Speech by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), at the Fund Managers Association of the Philippines, Inc. General Membership Meeting , Manila, 2 February 2022.	Benjamin E Diokno: Prospects for a productive partnership Speech by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), at the Fund Managers Association of the Philippines, Inc. General Membership Meeting , Manila, 2 February 2022. * * * To the directors, officers, and members of the Fund Managers Association of the Philippines, ladies and gentlemen, good afternoon. It has been almost a year since we came together for the 13th Annual FMAP Convention. I commend the incumbent officers of the FMAP, under the leadership of Mr. J Vincent Daffon, for ably steering the industry through the past year. Today, I would like to share our perspective on recent economic developments, as well as the state of the banking and trust industries. I will also highlight the Bangko Sentral’s priority regulatory initiatives and identify potential areas of cooperation with the FMAP membership. The economy has staged a strong turnaround, growing by 5.6 percent in 2021. The full-year growth exceeded the government’s forecast of 5 to 5.5 percent. The collective efforts of both public and private sectors proved crucial in ensuring a strong recovery. Inflation remains manageable. While headline inflation averaged 4.5 percent in 2021, there was a noted slowdown in price increases toward the end of the year. Inflation returned to within-target range in December at 3.6 percent. This was aligned with the BSP’s projections that inflation will ease toward the midpoint of the target range of 2 to 4 percent this year and in 2023. The country’s full-year balance of payments registered a surplus of 1.35 billion US dollars. This was largely composed of inflows from personal remittances, trade in services, net foreign borrowings by the national government, and foreign direct investments. Consequently, gross international reserves stood at 108.9 billion US dollars as of end-2021. This represents 10.3 months’ worth of import cover, way more than the three-month standard buffer to be considered adequate. Domestic liquidity situation continues to reflect the decisive measures taken by the BSP over the past two years to boost liquidity in the financial system. M3, a broad measure of the economy’s money supply, expanded by 8.3 percent to 14.8 trillion pesos in November 2021. Domestic claims grew in line with sustained borrowings by the national government and the improvement in bank lending to non-financial private corporations. Remittances from overseas Filipinos are also on the rise, with cumulative personal remittances aggregating to 31.6 billion US dollars as of end-November 2021. 1/3 BIS central bankers' speeches This represents a year-to-date growth of 5.3 percent. Our banking system demonstrates resilience. Total assets grew by 7.0 percent year-on-year to 20.4 trillion pesos as of end-November 2021, while total deposits rose by 9.2 percent to 15.8 trillion pesos. The capital adequacy ratio of universal and commercial banks stood at 16.9 percent on a solo basis as of the third quarter of 2021. The industry’s liquidity coverage ratio was at a healthy 197.5 percent as of end-October 2021. We are pleased to note that banks are expanding their lending operations. Loans grew by 4.6 percent year-on-year in December 2021. This signals an improvement in consumption and investment activities. Meanwhile, non-performing loans accounted for a manageable 4.3 percent of outstanding loans. The trust industry continues to grow as well, with assets under management or AUM reaching almost 5 trillion pesos as of September 2021. This marks a remarkable increase of one trillion pesos, or 25 percent, from the pre-pandemic level. The continued surge in unit investment trust funds or UITFs in terms of both volume and number of participants has propelled the growth of the industry. UITF assets grew by 22 percent year-onyear to 1.3 trillion pesos by September 2021, with around two million participants. The accessibility of UITFs via various digital platforms significantly contributed to this growth. Trust assets also remain highly liquid, with 90.3 percent classified as investments in highly marketable securities and deposits in banks. The BSP will continue to enhance the regulatory framework for our supervised institutions. In relation to fund management, our priority areas include policy reforms under the Trust Business Model Initiative, digitalization, and sustainable finance. One important upcoming issuance under the Trust Business Model Initiative involves guidelines on performance measurement. This shall set out the BSP’s expectations on the selection of benchmarks for UITFs, based on the principles of fair representation and full disclosure. The issuance aims to establish a common framework across the trust industry on benchmark selection and ensure that clients are provided with the necessary information for them to adequately assess fund performance. As we actively move towards a more digital society, I call on the FMAP and its memberinstitutions to embark on and accelerate your own digital transformation journeys. Digitalization can reduce distribution costs and make financial transactions faster and more convenient. Financial institutions can also employ digital means to serve several clients simultaneously, thus expanding reach. The BSP has issued the Sustainable Finance Framework, which advocates for the integration of sustainability or “Environmental, Social, and Governance,” or ESG, principles into the operations of supervised institutions. While the formal framework is specifically geared toward banks, we strongly encourage fund managers to consider environmental and social risks in your operations as well. ESG investing is a principles-based strategy that can provide long-term favorable financial 2/3 BIS central bankers' speeches returns. I invite the members of the FMAP to adopt ESG principles in your product offerings and investment strategies. Some fund managers already offer ESG funds, with three related UITFs currently available in the domestic market. These had an aggregate AUM of 633.8 million pesos as of September 2021. There are several more ESG funds under development. Given the strong value proposition of ESG-related financial products, the BSP expects fund managers to be diligent in ensuring that your chosen investment outlets adhere to the ESG investment standards. This entails sufficient evaluation of the issuers’ sustainability-related commitments. Moreover, funds that are marketed as ESG products should have adequate disclosure on sustainability goals and impact. As responsible actors in the sustainable finance space, your promotion of investor protection is of the utmost importance. In closing, let me extend my well wishes to the new officers of the FMAP. May you live up to the confidence placed in you by the membership. As the BSP continues to enhance the regulatory framework, I count on the FMAP and its leadership to be effective partners in fostering increasing digitalization and sustainable finance. Together, we can achieve more inclusive and sustainable financial markets! Thank you and mabuhay tayong lahat! 3/3 BIS central bankers' speeches	central bank of the philippines	2,022	2
Speech by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), at the Fitch Ratings Annual Review, Manila, 7 February 2022.	Benjamin E Diokno: Navigating the Philippine economy toward recovery Speech by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), at the Fitch Ratings Annual Review, Manila, 7 February 2022. * * * Good afternoon. Recent developments show the Philippines is on the road to recovery, with encouraging signs suggesting that the worst may be behind us. The economy grew by 5.6 percent last year, exceeding the government forecasts of 5 to 5.5 percent and reversing the recession in 2020. The unemployment rate fell to 6.5 percent in November 2021 from a peak of 17.6 percent in April 2020. Full-year inflation averaged 3.9 percent in 2021 based on 2018 CPI series. Inflation further eased to 3 percent in January 2022, supporting the narrative that inflation is on a downward trajectory. The Development Budget Coordination Committee (DBCC) kept the inflation target range at 3.0 percent ± 1.0 percentage point for 2022–2024. Inflation expectations are well anchored, as shown by surveys of private sector economists and forecasts of multilateral agencies. Overall liquidity conditions are sound. In December 2021, M3 expanded by 7.7 percent. Lending by universal and commercial banks rose for the fifth straight month, up 4.6 percent year-on-year. This signals an improvement in consumption and investment activities. Exposure to bad debts remained manageable. The NPL ratio of the Philippine banking system settled at 4.3 percent as of end-November 2021. Banks are well capitalized. Capital adequacy ratio of UKBs is well above the BSP’s minimum requirement of 10 percent and the Bank for International Settlements’ 8 percent. The country’s external sector remains robust, supported by steady sources of foreign exchange. Remittances rose by 5.2 percent year-on-year to USD28.4 billion in January to November 2021 while BPO revenues grew by 8.3 percent to USD17.4 billion in January to September 2021. FDIs grew by 48.1 percent in the first 10 months of last year to USD8.1 billion, as foreign investor sentiment improved. External debt-to-GDP ratio stood at 27.3 percent as of end-September 2021 compared with about 60.0 percent in mid-2000s. Gross international reserves (GIR) stood at a hefty US$108.9 billion as of end-December 2021, providing ample cushion against unforeseen demand for foreign exchange. Goods exports rose by 16 percent and imports by 30.2 percent in January to September 2021 amid strong rebound in demand from major trade partners. 1/2 BIS central bankers' speeches Moving on to the BSP’s crisis response… Through a series of rate cuts, the BSP brought the policy rate to a record low of 2.0 percent. Up to now, the policy rate is kept at this level. We also reduced the reserve requirement ratio (RRR) to increase loanable funds. We incentivized lending to MSMEs—a sector hit hard by the pandemic—by treating new loans to them as compliance with the reserve requirement. We temporarily increased the single borrowers’ limit, raised the ceiling for real estate loans, and allowed grace period for loan payments. We likewise put a cap on credit card charges at 2 percent per month and put a temporary interest-rate ceiling on short-term loans from lending and financing companies. The BSP also helped government finance its COVID-19 response through provisional advances and dividends. In addition, we remitted P38.9 billion in total dividends to the national government for 2020 and 2021. Other initiatives are setting the stage for the Philippines’ long-term development. With financial digitalization, the BSP targets at least half of retail transactions done digitally and at least 70 percent of adult Filipinos owning a transaction account by 2023. The following legislative measures will bring enormous benefits to the economy… Meantime, tax reforms will rebuild fiscal space. Investments in human capital and infrastructure will raise productivity. Freer markets, such as the recently liberalized rice sector, will lead to lower prices. And digitalization will improve efficiency in financial and public services. All of these structural reforms, ramped up vaccine rollout, and enhanced management of COVID-19 risks, support the country’s full recovery. The numbers show the macroeconomic targets in the next two years. Allow me to end with three key points: First, the country’s macroeconomic fundamentals are sound. Second, while uncertainties remain, enhanced health risk management and structural reforms will help sustain economic recovery. Third, the BSP choose to keep a patient hand on various policy levers to determine the timing and pace of our exit strategy. We will always rely on data to guide our future policy decisions. 2/2 BIS central bankers' speeches	central bank of the philippines	2,022	2
Speech by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), at the Asia-Pacific ESG Investors Summit, Manila, 9 February 2022.	Benjamin E Diokno: Sustainable finance and its impact on the Philippines’ post-pandemic economic outlook Speech by Mr Benjamin E Diokno, Governor of Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), at the Asia-Pacific ESG Investors Summit, Manila, 9 February 2022. * * * To our fellow advocates of sustainability, co-speakers, and everyone here present, good morning. It is a pleasure to speak in front of the “Pillars of the Green Industry” to share the BSP’s critical role in promoting the sustainability agenda in the financial system. Let me start by providing you with an update on the Philippines’ economic outlook, followed by the BSP’s initiatives and key milestones in our sustainability playbook. Lastly, I will leave some insights on how these sustainable aspirations tie-in to post-pandemic economic outlook. We welcome the year 2022 with optimism. Amid the threats from the evolving variants of Covid19 virus, we see that the Philippine economy will be on a strong growth trajectory. The strong fiscal and monetary measures complemented by appropriate health interventions helped boost the country’s better than expected economic growth of 5.6 percent in 2021. Meanwhile, the country’s headline inflation rate averaged 4.5 percent in 2021. We see inflation easing to within the target range of 2 to 4 percent this year. The country’s gross international reserves remain hefty at $108.9 billion as of end-December 2021. This GIR level is equivalent to 10.3 months’ worth of imports of goods and payments of services and primary income. Personal remittances from overseas Filipinos posted an increase of 5.3 percent to USD31.6 billion for the first eleven months of 2021 as compared to same period in 2020. The strong growth in cash remittances provides a consistent supply of foreign exchange and source for consumer spending. The peso appreciated by an average of 0.75 percent or P49.3/$1 in 2021 from 49.6/$1 the previous year. The Philippine banking system remains sound with ample capital and liquidity buffers to support continued growth in assets and deposits amid the COVID-19 pandemic. The banking system’s total assets grew year-on-year by 7 percent to P20.4 trillion as of endNovember 2021 from the expansion of funds, mainly from deposits, channeled to lending and investment activities. Bank credit growth was observed with total loan portfolio expanding year-on-year by 4.3 percent to P11 trillion as of end-November 2021, which is mainly attributed to real estate lending. The quality of the banking sector loan portfolio remained manageable and within BSP’s expectations with total non-performing loans at 4.3 percent as of end-November 2021. During the same period, NPL coverage ratio remains high at 87.1 percent. The banking system posted an annualized net profit growth of 8.5 percent year-on-year or P199.8 billion as of end-September 2021. Banks maintained sufficient capital and liquidity buffers. The capital adequacy ratios of banks are well-above the minimum thresholds of 10 percent set by the BSP and 8 percent by the Bank for International Settlements. As of end-September 2021, universal and commercial banks 1/6 BIS central bankers' speeches registered a risk-based CAR of 17.4 percent on a consolidated basis. Meanwhile, liquidity buffers remain relatively stable, with liquidity coverage ratio of universal and commercial banks at 197.5 percent on a solo basis as of end-October 2021 or almost twice the 100 percent minimum threshold. The high LCR indicates the ability of banks to fund its shortterm funding requirements including liquidity shocks. Similarly, the Minimum Liquidity Ratio of stand-alone thrift, rural and cooperative banks surpassed the 20 percent minimum. Despite the noted resilience of the banking sector, the BSP extended in January 2022 the prudential and operational relief measures needed to sustain the momentum of bank lending and to ensure continued access to financial services by the public, including the vulnerable sectors of the economy. This is in response to the recent surge in COVID-19 cases in the country. The regulatory relief measures include, among others, the extension of the effectivity of the 30 percent single borrower’s limit (SBL), non-imposition of sanctions for SBL breach by foreign bank branches subject to a ceiling, reduction of credit risk weight for performing loans to micro, small and medium enterprises, and reduction of the MLR of stand-alone thrift, rural and cooperative banks, until end-December 2022. That said, the BSP recognizes that sustainability objectives play a significant role in achieving our core mandates of maintaining price and financial stability. We also see green investments as one of the integral tools to recovery. A study by the OECD shows that the implementation of properly designed green stimulus measures can deliver economic and environmental benefits in the aftermath of a crisis. This was demonstrated by countries that used green stimulus approach consequent to the Global Financial Crisis. These measures include investments in energy efficiency, green infrastructure, support for environment-related research and development, support for low-carbon vehicles, among others. Also, according to the International Finance Corporation of the World Bank Group, investments in the Philippines and in three other big emerging markets – China, Indonesia, and Vietnam – may reach 5.1 trillion US dollars if these economies move towards a green recovery approach postpandemic. Indeed, the pandemic recovery presents an opportunity to scale-up investments in green projects and activities. It is in this context that the BSP plays a pivotal role in providing a sustainable regulatory pathway that will enable the financial system to mobilize credit and capital towards sustainable or green projects and activities. As such, BSP launched the Sustainable Central Banking Program in 2019. This sums up our role as enabler, mobilizer, and doer, in championing the sustainability agenda. As an enabler, we aim to provide a regulatory environment that will empower banks to take on the sustainable path and to drive sustainable finance and activities. Towards this end, we issued the first two sets of regulations covering the Sustainable Finance and the Environmental and Social Risk Management Frameworks. Moving forward, we will issue guidelines on the management of environmental and social risks in relation to the investment activities of banks, climate stress testing and prudential reporting. 2/6 BIS central bankers' speeches We are also considering the use of regulatory incentives to nudge banks to extend green loans or finance sustainable investments. We are currently studying the use of preferential rediscount rates or provision of higher loan values, which will largely depend on the results of our ongoing assessment. The BSP likewise proposed the recognition of sustainable finance as one of the allowable forms of compliance with the required credit to the agriculture sector in the proposed bills seeking to amend the Agri-Agra Law. Allow me to walk you through the two sustainability-related Frameworks issued by the BSP which will facilitate in mobilizing funds to green or sustainable investments and projects. The Sustainable Finance Framework, issued in April 2020, provides the overarching principles in integrating sustainability principles and environmental, social and governance considerations in banks’ corporate and risk governance frameworks, strategies and operations. There are three key elements in the Framework: First, the fundamental role of banks’ board and senior management in leading and institutionalizing the adoption of sustainability principles within the organization. With this, we expect the board and senior management to promote a culture that embeds environmental and social risk consciousness in business decisions and in the overall strategic thrusts of the organization. Second, the adoption of an Environmental and Social Risk Management System which covers policies, procedures, and tools to identify, assess, monitor, and mitigate exposures to environmental and social risks. This is the subject of the second phase of our policy issuance. Third, the disclosure requirements, which we consider as a key element in driving sustainable finance as it promotes transparency and market discipline. We recognize the importance of adequate and quality disclosures in making informed green credit and investment decisions. Hence, we expect banks to disclose the fundamental components of their sustainability plan and strategy in their Annual Reports. We expect banks to fully implement the Framework in 2023. Anchored on the principles laid down in the Sustainable Finance Framework, the BSP issued more specific guidelines on the management of environmental and social risks in relation to credit and operational risks last October 2021. The ESRM Framework provides detailed expectations on the board in setting strategic environmental and social objectives, considering material environmental and social risks in the banks’ capital planning process, institutionalizing a capacity building program to equip all personnel in managing such risks and adopting an effective communication strategy. In terms of credit risk, we expect banks to embed environmental and social risks in their credit risk strategies and credit risk management system. This may include progressively increasing targets on the proportion of the loan portfolio into green or sustainable investments as well as incorporating the environmental and social risks in the entire credit process, from underwriting, review and provisioning, among others. Moreover, the framework expects banks to conduct vulnerability assessments which will later on connect into their business continuity plans. This is critical in ensuring the ability of banks to withstand and quickly resume operations during disruptions. We have witnessed how the health crisis and severe weather events, like Super Typhoon 3/6 BIS central bankers' speeches Odette, disrupted the operations of banks. This has highlighted the importance of integrating environmental and social risks in the banks’ operational risk management system, and in turn, building their operational resilience. As mobilizer, BSP influences banks to embrace sustainable business and responsible investment decisions. As part of greening the BSP’s investment process, we are gradually incorporating sustainability considerations in our portfolio management. We are also reviewing the strategic allocation of investments towards those that espouse environmental, social and governance principles. In fact, the BSP has invested USD 550 million in the Green Bond Fund managed by the Bank for International Settlements. We look to invest more funds to the Asian Green Bond Fund to be launched by the BIS in 2022. Through these actions, we lead by example and trust that banks will follow suit. Our initiatives are guided by our active participation in global and local conversations on sustainable finance. At the global front, the BSP is a member of the International Finance Corporation – supported Sustainable Banking Network (SBN) and is a plenary member of the Central Banks and Supervisors Network for Greening the Financial System or NGFS since July 2020. At the national level, the BSP, through the Financial Sector Forum, leads the financial sector in harmonizing regulatory expectations on sustainable finance, including the governance, risk management and disclosure aspects. Meanwhile, the BSP co-chairs, with the Department of Finance, the Interagency Technical Working Group on Sustainable Finance or the “Green Force”. The Green Force, consisting of 18 government departments and agencies, is the country’s response to adopt a whole of government approach in mitigating climate change and other environment related risks, building our resilience against these risks, and ushering the flow of finance to green or sustainable projects. The Green Force endeavors to harmonize all government policies concerning green and sustainable projects as we see the need to establish a cohesive action plan that will cut across all sectors. Among the key milestones of the Green Force is the development of the Philippine Sustainable Finance Roadmap and the Sustainable Finance Guiding Principles which were launched in October 2021. The Roadmap sets out the high-level strategic plans to promote sustainable finance and address climate change. On the other hand, the Guiding Principles provide the standard considerations in identifying which economic sectors or activities can contribute to sustainable development with special focus on addressing climate change. The Guiding Principles is based on principles-based taxonomy that will enable investors to identify opportunities that comply with sustainability criteria for high-impact investments. The same will help banks and financial institutions to create and structure sustainable finance products and support financing and investment decisions. 4/6 BIS central bankers' speeches We aim to quicken the implementation of the taxonomy through the issuance of more detailed standards to be developed by the Green Force working clusters. The Financial Sector Forum will likewise facilitate alignment and implementation of the common standards across the financial sector. With these developments, we believe that banks are better equipped in scaling up sustainable or green finance and in promoting the low carbon transition financing. But we recognize that there are first mover banks. In fact, of 15 issuers of green, social and sustainability bonds in the country, seven are banks. Since 2017, they have issued around USD 2.9 billion worth of sustainable bonds. During the pandemic, two banks have issued social bonds totaling approximately P29 billion to finance the needs of eligible micro, small and medium enterprises. At the regional level, sustainable bond markets in ASEAN+3 continued to expand to USD 415.6 billion as of end-December 2021 with green bonds dominating the market at USD 294.0 billion. Meanwhile, the country is also seen to issue sovereign bond in the international sustainable bond market. The Department of Finance recently launched the Sustainable Finance Framework. This sets out how the National Government intends to raise green, social or sustainability bonds, loans and other debt instruments in the global capital markets. This information presents clear opportunity for banks and investors to build on the strong momentum in the issuance of green and sustainable bonds both at the local and regional markets. Achieving the Nationally Determined Contributions and the Sustainable Development Goals also present an opportunity for sustainable finance. Financial institutions can introduce new and innovative sustainable financial instruments that are responsive to their clients’ needs and at the same time contribute to our carbon emission reduction targets of 75 percent by 2030. These sustainable financial products may also be extended to fund the post-pandemic recovery of the micro, small and medium enterprises and agricultural sectors which were greatly affected by the pandemic. Meanwhile, companies that engage in sustainable projects or activities may benefit from obtaining funding at potentially reduced competitive costs. This may be possible through the concerted efforts of both public and private sectors to develop a pipeline of green investments and to incentivize sustainable finance supplemented with blended finance. With the Philippines being vulnerable to typhoons and climate change related risks due to its geographical location, “green recovery” approach is the ideal to strike the right balance in implementing economic strategies and in building climate resilience. We are confident that our sustainability efforts complemented by favorable macroeconomic fundamentals and sound banking system will all tie in as we move forward to a more stable, resilient, and inclusive Philippine financial system. In closing, I’d like to emphasize the impact of sustainability in our lives. Sustainability is not just a business decision that we have to make, but one that will have impact on our lives and the world as we know it. It’s important that we act now. The sooner we do, the sooner we will reap the benefits of sustainable finance in the post-pandemic world. Thank you and a pleasant day to everyone. 5/6 BIS central bankers' speeches 6/6 BIS central bankers' speeches	central bank of the philippines	2,022	2