Time for change-A A +A
Sunday, September 29, 2013
YEAR in and year out, the Bangko Sentral ng Pilipinas has been recommending to Congress proposed amendments to its 20-year old charter.
The proposed amendments can be grouped into three categories: a. amendments that would strengthen BSP’s monetary stability function. b. amendments that would strengthen BSP’s financial stability function and c. amendments which would strengthen BSP’s corporate and financial viability.
The usual bills are filed in both houses at the start of every session of Congress. The routine committee hearings are held. But somehow the BSP proposed legislative agenda always gets relegated to the background and never gets past the Committee stage.
This year, BSP officials are a bit more optimistic. Word from Senate President Franklin Drilon has been encouraging. The BSP charter amendment is now reportedly among the legislative priorities of the present Congress.
The Bangko Sentral ng Pilipinas (BSP) may be getting plenty of positive reviews and awards these days for its remarkable work in our economy, but this does not mean there is no longer room for improvement.
The challenge is to continue getting better and to keep in step with the developments in our globalized economy.
In the recently held 10th BSP Media Lecture Series, BSP Deputy Governor Vicente S. Aquino explained how the BSP can better perform its constitutional mandates of promoting and maintaining monetary and price stability in the country through the sought-after charter amendments.
To improve its corporate and financial viability, the BSP proposes to institutionalize an additional capitalization of P150 billion on top of the P50 billion that the BSP charter provides. Of the P50 billion, only P40 billion has been paid in so far.
BSP also calls for a. the restoration of its tax exemption (a privilege enjoyed by most central banks); b. flexibility in establishing adequate loss allowances and reserve buffers; and c. enhancements to its credit operations.
These proposed provisions aim to offset BSP’s heavy burden (mostly interest expense) incurred by the BSP as it tries to keep inflation low and stable.
Another salient feature of the proposed bill involves the strengthening of BSP’s monetary stability function.
The BSP seeks the restoration of the authority to obtain data from any private person/entity, the authority to issue its own negotiable certificates of indebtedness even during normal times; and the removal of thresholds in the growth of monetary aggregates and credit.
If approved, these provisions will enable BSP to come up with more responsive monetary policy since it will now have access to more relevant, reliable, timely, and comprehensive data on the economy.
With its own debt securities, meanwhile, the BSP will have greater flexibility in its open market operations.
Focus on monetary aggregates is now given less weight in analyzing and evaluating inflationary pressures.
The proposed amendments also seek to give more power to the BSP as the supervisor and regulator of financial institutions.
BSP hopes to make financial stability as an official mandate of the BSP along with monetary stability and price stability.
To strengthen BSP’s supervisory authority, the proposed amendments seek to expand its jurisdictions to cover other financial institutions such as money changers and remittance agents; to grant authority to BSP to impose sanctions on transfers and acquisitions of substantial shares of banks/quasi banks without BSP approval; to enable a flexible conduct of risk-based supervision; and to impose stronger sanctions like the forfeiture of profits from unauthorized financial transaction.
BSP also seeks to improve its resolution mechanisms for problematic financial institutions. BSP suggests the lifting of the bank secrecy law in aid of BSP examination activities. Finally, BSP bats for legal protection for BSP officials and staff while performing their official duties.
Given the magnitude of BSP’s responsibilities in a rapidly evolving economic and financial landscape, it is about time that Congress gives more than perfunctory attention to the amendment of BSP’s charter.
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