ALL in all, the Bangko Sentral ng Pilipinas did well in 2009. And so did the domestic banking system.
Once again, the Bangko Sentral ng Pilipinas delivered on its principal mandate of maintaining price stability despite the twin challenges posed by increasing oil prices and commodity supply constraints caused by Typhoons Ondoy nd Pepeng.
Because of a benign inflation, the BSP could afford to peg its policy rates at an all time low. This has translated into lower pass-on interest rates charged by banks to their clients. Lower inflation also helped maintain the purchasing power of the ordinary Filipino.
Also because of low inflation, the Bangko Sentral could afford to provide liquidity enhancement mechanisms, thus providing the necessary environment for banks to increase lending activities. Indeed, commercial loans expanded during the year albeit at a moderate pace.
The external sector provided another source of stability. Supported by record remittance flows from overseas Filipinos and receipts from the Business Process Outsourcing sector, the country posted a balance of payment surplus in excess of US $ 3.3 billion.
This in turn has resulted in a record build up of Gross International Reserves – more than enough to pay for 9 months of imports and more than enough to cover our short term maturing foreign obligations.
For its part, the Philippine banking system weathered well the global financial storm.
According to BSP Governor Amando M Tetangco Jr., “Important banking reforms, particularly in the areas of corporate governance, risk management, and asset clean-up, have strengthened the banking system further, boosting its overall performance in terms of higher asset growth, enhanced asset quality, improved profitability and better capitalization.”
The banking system’s capital adequacy ratios (CARs), a prime indicator of financial health, showed improvements both on a solo and consolidated basis.
The Bangko Sentral ng Pilipinas requires a minimum CAR of 10 per cent while the Basel II Accord prescribes a minimum CAR of 8 percent. Owing to significant buildups in qualifying capital as well as issuances of tier capital notes, most banks easily hurdled the capital requirements. As of the second quarter, CAR on a consolidated basis hit 15.68 per cent while CAR on a solo basis hit 14.81.
2009 saw the BSP continuing to be active in launching and conducting various advocacies. Examples of these are the Credit Surety Fund, Economic and Financial Learning Centers in Luzon, Visayas and Mindanao, Tulong Barya para sa Eskuwela, Public info campaign and OFW financial literacy campaign.
The Philippines also gained global recognition for leadership in microfinance and mobile banking.
Praises for the Bangko Sentral’s model regulatory approach in microfinance and mobile banking came from such prestigious groups as the London-based publication, The Economist, The Financial Times, the World Bank’s Consultative Group to Assist the Poor and the newly formed G20 Financial Inclusion Experts Group.
A significant milestone also occurred in the legal front. The Supreme Court affirmed in the Legacy rural bank cases the authority of the Monetary Board to determine the insolvency of banks and to place them under receivership. The ruling effectively restricted undue interference by the courts in the Monetary Board’s exercise of its regulatory and supervisory powers over banks.
2009 saw the production and roll out by the BSP of e-passports. This enabled compliance by the Philippines with the international deadline of 2010. For the opportune implementation of the e-passport project, President Arroyo conferred BSP Governor Amando M. Tetangco Jr. the Order of Sikatuna (Rank of Datu).
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