BSP highlights game-changing reforms during PHL Economic Briefing

The Bangko Sentral ng Pilipinas (BSP) has implemented game-changing reforms in monetary policy, payments system, financial inclusion, digitalization and sustainability to ensure a stronger and more inclusive Philippine economy.

During today’s Philippine Economic Briefing, BSP Governor Benjamin E. Diokno highlighted that reforms implemented over the past five and a half years have enhanced BSP’s effectiveness in fulfilling its mandates and advocacies.

In line with its promotion of price stability, the BSP adopted the “Interest Rate Corridor framework” in 2016 to strengthen the impact of its monetary policy decisions on the rest of the economy.

The BSP was also given the authority to issue its own debt securities with the passage of amendments to the BSP Charter in 2019. This provided the BSP with an additional instrument for managing financial system liquidity.

Another key reform passed to ensure banking sector stability is the Financial Institutions Strategic Transfer Act (FIST). The FIST Act provides a mechanism for financial institutions to better manage their non-performing loans amid the pandemic.

The BSP has also issued enabling regulations in line with the passage of RA No. 11439 providing for the Regulation and Organization of Islamic Banks. This would help attract funds from Islamic investors looking for opportunities to support infrastructure requirements particularly in the Bangsamoro Autonomous Region in Muslim Mindanao.

To promote an inclusive payments system and to accelerate financial inclusion and digitalization, the BSP implemented the National Retail Payment System (NRPS) in 2017. The NRPS enabled interoperability among payment service providers, thus promoting seamless digital transactions.

The BSP also launched the Digital Payments Transformation Roadmap 2020-2023 (DPTR), which aims to convert half of the total volume of retail payments into digital form and onboard 70 percent of Filipino adults into the formal financial system using payment or transaction accounts by 2023.

As of end-2020, the share of monthly digital payments volume reached 20.1 percent, slightly exceeding the BSP’s target of “20 percent by 2020” set in 2015. This indicates that the adoption of digital payments remains on track to achieve the 50 percent target by 2023.

A key initiative under the DPTR was the issuance of the Digital Banking Framework, under which the BSP granted digital bank licenses to six financial institutions as of end–2021. This is expected to further accelerate the creation of e-money accounts.

Likewise, the BSP introduced the basic deposit accounts framework, which enables accountholders to access a wide range of financial services, including savings, credit, insurance, investments, and remittances.

As of the second quarter of 2021, the number of basic deposit account holders in the country reached 7.4 million. Filipinos with basic and other types of deposit accounts now total 90.5 million.

To support the country’s sustainability agenda, the BSP launched the “Sustainable Central Banking Program” to foster environment-friendly practices at the central bank. The BSP also issued the “Sustainable Finance Framework” and the “Environmental and Social Risk Management System Framework”.

As the Philippine economy recovers, the BSP’s pandemic exit strategy involves an evidence-based and data-driven “recalibration of monetary operations, unwiding of our liquidity provision, reduction in monetary accommodation, and building our buffers against future crises. We are striking the right balance between providing support to the economy and fulfilling our mandates of price and financial stability,” said Governor Diokno.