Devoted

He was the proverbial man who spoke softly and carried a big stick.

Before assuming the BSP governorship, Nestor Espenilla was for many years the deputy governor for bank supervision. In short, he was the policeman with the nightstick.

There was no one like him in that job. He knew the rules and enforced them relentlessly and without exception. He shut down individual banks when they had turned illiquid. He imposed hefty fines on banks when their compliance was found to be lax.

It was Espenilla who imposed a P1 billion penalty on RCBC just because it became possible for one rouge branch manager to allow questionable accounts to be opened. Through those accounts passed remittances believed to have come from the cyber heist of Bangladesh Bank.

Espenilla’s tenure as deputy governor for bank supervision coincided with the introduction of tough reporting requirements on suspicious transactions. This was the period when the country, and the rest of the world, tightened the screws to prevent money laundering.

There is no day in a banker’s life as dreaded as when one is summoned to Espenilla’s office to explain a supervisory finding. The man laid out the finding, always calmly and patiently. Then he hands down the enforcement order, tersely but courteously.

Over the years when Espenilla was in charge, the post of compliance officer became a very important one in every bank’s hierarchy. The compliance officer saw to it that the enterprise complied with every rule the BSP set down. He could overrule the CEO and, in instances, even the board. Either that or the bank is summoned to Espenilla’s office.

Nesting, as everybody called him, was like a monk. Central banking was his only job and he was devoted to it completely. He joined the BSP straight out of college. Like many of his colleagues in that venerable institution, central banking was his only universe.

 It has definitely worked to the advantage of our economy that our recent BSP officials were as cloistered as our Supreme Court justices. The career central bankers who ran the BSP, unfettered by conflicts of interest, whipped the banks into the disciplined institutions they now are. The result is a strong and stable banking sector that anchors the country’s economic achievement.

We have come a long way from those bad old days when bank failures intermittently put our whole economy in jeopardy. The career central bankers who ran the BSP made sure acute regulatory enforcement made bank failure not only improbable but almost next to impossible.

Nesting Espenilla was one of those who understood tough love was good not only for the banks but for the whole economy. The banking community has come to appreciate that.

Espenilla performed as a true stalwart in the remarkable Duterte economic team responsible for all the good things now happening.

Reformer

For many years, we saw only one dimension of Nesting Espenilla: that of unrelenting enforcer of rules.

After he assumed the governorship, we saw a central banker in full blossom. Nesting understood that the banks did not just have to be compliant with the rules of prudential behavior, they needed to be centers of innovation as well.

More than 4 out of every 5 Filipinos are unbanked. They have no access to bank services and no means to avail of financial services. That is a major constraint on our ability to grow an inclusive economy that benefits all Filipinos and draws the largest number to the mainstream of wealth creation.

Nesting led the way to make the National Retail Payment System a reality. Along with InstaPay (an electronic fund transfer system) and PESONet (an automated clearing house to speed up transactions), the tremendous powers of digital technologies are brought to bear to improve efficiency, bring down transactions costs and broaden the base of public participation in the financial system.

Nesting goaded the banks and the other financial institutions under BSP supervision to continuously reinvent their business models. The rapid evolution of finance technologies will soon make brick-and-mortar banking obsolete. These new technologies open many doors for inclusion in the financial system and reduce costs all around.

Today, we can make payments through our mobile phones. Transactions can be closed in real time. Soon enough, it should be possible to offer financial services remotely.

There will be many points of convergence between banks, insurance companies, retailers and telecoms companies. The possibilities are dazzling.

Those many points of convergence, enabled by breathtaking developments in digital technologies (especially with the introduction of 5G), will require rethinking regulatory policies as well. As new technologies integrate once separate spheres of activity, regulatory policies must be at once comprehensive and integrative as well.

Increasingly, for instance, our mobile phone numbers will be the most important set of numbers we have to identify us. Fortunately, we now have a law that makes phone numbers portable. Fortunately, too, we finally passed last year a law establishing a national identification system that will enable remote transactions.

Too bad Nesting did not live long enough to appreciate the recent passage of a law further empowering the BSP. This law will enable the institution to expand and upgrade its regulations to cover a wider range of economic activities.

Nesting understood the trajectory new technologies were taking us. It is not possible to accurately paint the future but it is certainly indispensable to understand the forces that shape things.

Nesting’s tenure was unfortunately brief. But it was enough to create a legacy. In Nesting’s case, this was about preparing for FinTech and all it brings.