The Bangko Sentral ng Pili-pinas (BSP) said the banking system needs to be handled with extreme care this year in light of homegrown or external shocks that may affect the local financial system in 2015.
At the recent annual bankers’ reception held at Fort Abad, BSP Governor Amando M. Tetangco Jr. said that while the banking system has a history of strength and resilience, the industry must not be complacent but must remain mindful of risks that could surface down the line.
“I have learned in my almost 10 years as governor of the Bangko Sentral [ng Pilipinas] that each year is different. While our mandate remains the same, our operating environment is constantly shifting and changing. Sometimes, it turns on its head. So, how do we navigate in uncharted waters? Well, with extreme care,” Tetangco said.
Tetangco further said that along with extreme care, one must ensure the banking system is in shipshape condition and properly equipped to deal with the unfolding of events in the financial system.
The central bank in the second half of 2014 started implementing a wave of reforms even when the banks were at their strongest.
At the start of 2014, the BSP implemented the Basel 3 Accord on capital ratios. Later that year the BSP also let out a series of mandates, including the higher capital requirements for banks, the regulations for so-called domestic systemically important banks and the shift from the banks’ focus on collateral to the clients ability to pay.
Likewise, the BSP subjected the real-estate sector to stress tests and monitored the banks’ exposure to the property sector, whose maiden results should soon come out.
“Our stress tests indicate that our banks have enough capital to withstand extreme shocks in credit and market risks,” Tetangco said.
“I believe, therefore, that even as episodes of stormy weather develop, the Philippine banking community can face 2015 with confidence given its strong balance sheet, solid capital base that exceeds global standards, product innovations, and adherence to international standards for governance and risk management,” Tetangco added.