Bunye: The BSP and You (Third of a Series)

Monday, June 13, 2011

IN THE last two weeks, I have discussed how the BSP plays a number of roles as it carries out its duties and responsibilities in the Philippine economy.

As the country’s money supplier, the BSP has the sole authority and exclusive power to issue the Philippine peso. As the money manager, it makes sure that there is just enough money to meet the needs of the Philippine economy.

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As supervisor and regulator, the BSP regularly monitors and examines the operations of banks, as well as non-banks which are performing quasi-banking functions, to ensure that they are healthy and fit to serve the public.

As the bank of banks, the BSP does not deal directly with the public. Instead, the central monetary authority accepts deposits from banks and grants loans to banks by way of rediscounting.

As the lender of last resort, the BSP provides loans or advances to banks in times of emergencies which directly threaten monetary and financial stability.

Even during normal times, the BSP may also grant emergency loans to individual banks suffering from temporary liquidity problems. This occurs when a bank cannot temporarily meet its immediate obligations but the bank’s assets are still more than enough to cover its liabilities.
Illiquidity should be differentiated from a case wherein a bank is insolvent, i.e., its liabilities are more than its assets. Insolvency normally leads to a bank’s closure.

The BSP also performs the role of main bank to the Philippine government. As the government’s official depository, some of the tax collections, proceeds of the sale of government securities, and foreign loans are deposited with the BSP.

Conversely, when the government needs to repay its foreign debts or disburse money to pay expenses, it withdraws its funds from the BSP.
Since these government funds form a significant portion of the total deposits in the financial system, coordinating the timing of government deposits and withdrawals is a key factor in the Bangko Sentral’s overall management of money supply.

It is for this reason that all government entities, including the national government, need to secure a favorable opinion from the BSP prior to obtaining a loan, whether domestic or foreign.

The BSP likewise implements and maintains an efficient payments and settlements system. Under the system, banks and other non-banks with quasi-banking functions (NBQBs) could settle their payments in real time.

In addition to its regular tasks, the BSP is committed to its various advocacy programs in promoting economic and financial education, microfinance and small- and medium-enterprise development, culture and arts, and corporate social responsibility initiatives.

These advocacies positively influence the lives of our countrymen especially those who want to learn more about how the economy works and look for ways to make their money grow; micro-borrowers who want to start their own business; schoolchildren and future entrepreneurs; art lovers and museum enthusiasts; and the less fortunate who are in need of financial assistance.

In conclusion, the BSP seeks to provide a solid anchor for the economy, as well as leadership through changing times. It aspires to touch the lives and mold the future of every Filipino.