BSP says new charter gives it more flexibility

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP)  said the amendments to its charter are vital for a stable economy and at the same time in expanding its supervisory powers.

“We cannot overemphasize the critical importance of these amendments,” BSP Deputy Governor Diwa Guinigundo said after President Duterte signed Republic Act 11211 amending the central bank’s charter.

For one, the provision raising BSP’s capitalization to P200 billion from P50 billion will enable it to promote greater price and financial stability.

Guinigundo said BSP’s authority to issue its own debt securities would empower it to conduct more effective market-based open market operations to preserve appropriate levels of liquidity and ensure stable prices.

Open market operations serve as a monetary tool wherein the BSP publicly buys or sells government securities from banks and financial institutions in order to expand or contract the supply of money.

By controlling the money supply, the central bank is able to exert some influence on the prices of goods and services and achieve its inflation objectives.  

On the other hand, Guinigundo said the authority to put up reserves against sharp foreign exchange fluctuations and the cost of liquidity management would allow the BSP to smoothen its presence in both the foreign exchange and money markets.

The peso emerged as the third weakest currency in the region after the Indian rupee and Indonesian rupiah. It depreciated 5.2 percent to end 2018 at 52.58 to $1 from 49.93 to $1 a year ago due to robust import growth as well as strong outflows due to the rate hikes by the US Federal Reserve and trade war between the US and China.

Guinigundo said the amendments would  also allow monetary authorities to require both public and private entities to provide key statistics and information.

“Without this authority, the BSP will not have the required data sets to deliver good and appropriate monetary and banking policies. We shall also have greater protection of our bank examiners to allow them to execute their supervisory responsibilities with greater confidence and without fear,” he said.

The new law signed by President Duterte amended RA 7653 or the BSP Charter passed 24 years ago.

“These amendments put central banking in the Philippines at the forefront of modern central banking commensurate with the BSP’s extensive responsibilities and public expectations,” Guinigundo said.