Nestor A Espenilla, Jr: Navigating the future
Speech by Mr Nestor A Espenilla, Jr, Governor of Bangko Sentral ng Pilipinas (BSP, the central
bank of the Philippines), at the BSP 25th Anniversary Celebration, Manila, 3 July 2018.
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Good afternoon fellow BSPers and a happy anniversary to everyone!
Today, we celebrate 25 years of the Bangko Sentral ng Pilipinas. It is an honor to share this
milestone with everyone here at the PICC. On behalf of the Monetary Board, I warmly greet the
entire BSP family, here in Manila, as well as at SPC, and across the regions via live-streaming.
For a quarter of a century, the BSP has ensured price stability, strengthened the financial
system, and has provided a reliable payments system. Indeed, the institution we proudly serve
has achieved remarkable feats over the past twenty-five years.
While our mandates have remained the same, our work has continued to evolve and adapt to an
ever-shifting economic landscape.
The growing interconnectedness of financial markets, coupled with the rapid pace of digitalization
and technological advancement, demands that we safeguard the financial system against
threats, even as we search for opportunities, through game-changing reforms and appropriate
regulations. Thus, it is only fitting that our anniversary's theme is "Navigating the Future." It is a
meaningful theme, conveying not only a sense of purpose, but one of urgency.
How must we navigate the future? The word "navigate" originates from two Latin words, "navis"
which means "ship", and "agere," which means "to drive." The art of navigation involves the
skillful planning, directing or plotting of a path... it imagines a voyage to a specific destination.
Literally, it refers to the "art of ship mastery" but is also used for "finding one's way".
For the BSP, our destination and mission is clear. It is encapsulated in our core mandates of
securing price stability, maintaining financial stability and promoting an efficient and reliable
payments system.
This is our path. But to continue successfully on it, we must draw inspiration from challenges
successfully surmounted. To forge ahead, we must be equally conscious of our identity - who
we are... and why we came to be.
Our very origins and establishment as a central monetary authority in 1993 were fraught with
struggle and was a product of lessons learned the hard way.
Perhaps this audience may not remember why there was a need to establish and organize what
is now known as the Bangko Sentral ng Pilipinas. BSP. Of our 5,322 work-force today, it is a fact
that 84% have been here less than 25 years. Many of you are likely unfamiliar with the Central
Bank of the Philippines (CBP), an entity separate and distinct from the BSP, and the events that
led to its dissolution.
The dissolution of the CBP and the establishment of the BSP and a separate legal entity called
the CB - Board of Liquidators (CB-BOL) were premised on the urgent need for an independent
central monetary authority... financially strong, enjoying fiscal autonomy, and free from political
influence. This independence is constitutionally enshrined.
For the last 25 years, we, the BSP, have proudly anchored ourselves on this independence. We
protect and uphold its demand for responsibility and accountability.
Let me recall some key accomplishments...
In response to the Asian Financial Crisis of the late 1990s, the BSP pursued structural reforms
that changed and improved the conduct of monetary policy and financial supervision.
In 2002, to better attain price stability objectives, the BSP formally adopted the inflation-targeting
(IT) framework. Since then, we have established a solid track record for hitting our inflation
targets and for being transparent on how we conduct monetary policy. In 2016, we established
the interest rate corridor (IRC) system to enhance monetary policy transmission and reinforce
the development of the domestic financial market. This year, we have commenced the gradual
phase-down of ultra-high reserve requirements to promote the efficiency of monetary policy.
Amid changes in financial market conditions and increasing sophistication of financial services,
we recognized a growing need for financial regulations to adapt, or else risk irrelevance. This is
just one of the lessons from going through two episodes of financial crises over the past two
decades-financial supervision must be proactive instead of reactive. We have thus shifted to a
more comprehensive, risk-based approach to banking supervision. This has significantly
improved the safety and soundness of individual banks and promoted early identification and
effective mitigation of system-wide financial risks.
In December 2002, the BSP shifted to a real-time gross settlement (RTGS) system. This made
payments and settlements more efficient. Today, we have PhilPaSS, a fully automated and
secure payments system. In 2017, PhilPaSS processed nearly P270 trillion worth of
transactions.
These are only some of BSP's major milestones. They encourage us to continue the journey
even in the face of challenges.
Our clear identity, our independence, the lessons we have learned and the expertise we have
gained for the last 25 years, assure we are on the right path.
A year ago, I took my oath as Governor of the Bangko Sentral ng Pilipinas. At the BSP Assembly
Hall, in my message, I said that, "central banking requires exemplary and coordinated ability to
navigate the currents of the global financial markets." On that day, last year, I first laid out my
goals for the BSP under my term. Even then, the art of navigation was highlighted. And even
then, I expressed that taking a "business-as-usual" stance just simply would not do. Then and
now, I emphasize that there is a need to be more agile and proactive with our policies and
programs.
This is the core of the "Continuity Plus Plus" agenda - our roadmap for navigating the future.
"Continuity Plus Plus" is a two-fold strategy. On the one hand, the call for continuity appreciates
the frameworks, methods, and buffers we have already put in place. It entails leveraging on our
legacy of excellence in fulfilling our core mandates.
At the same time, the need for "Pluses" recognizes that we must make our financial system
stronger, more dynamic, and truly inclusive through bold and purposeful changes. We intend to
accomplish this by implementing game-changing financial sector reforms, especially those that
aim to further develop deeper money, debt, and foreign exchange markets and efficient payment
systems that systematically build the country's resilience and promote its competitiveness.
Finally, I emphasize that for our initiatives to have meaning, we must ensure that their benefits
translate into opportunities for every Filipino to improve their quality of life. This puts financial
inclusion squarely at the heart of the "plus plus" agenda.
The BSP is a pioneer in this regard. We were probably the first central bank in the world to
establish a unit dedicated to promoting financial inclusion. We did this as early as 2007. Today,
we continue to create a supportive policy environment for broadening access to financial
services.
In the past year, we provided more access points and a broader range of financial products. We
introduced the "branch-lite" concept to reach underserved areas; the promotion of "basic deposit
accounts" (BDAs) to encourage account ownership among the unbanked; as well as the
issuance of guidelines on agricultural value chain financing to increase the flow of credit to the
agricultural sector. All these complement our long-standing campaigns to promote financial
literacy and consumer protection.
Recently, we have begun to harness the power and reach of the digital space to further push this
agenda. The digital revolution underscores the importance of innovation and technology to
ensure delivery of financial products and services to a wider segment of society. In this regard,
digital payment channels have found their way into our payments and settlements infrastructure.
Under the National Retail Payments System (NRPS), we aim to leverage on financial technology
-or FinTech- to bring about an inter-operable, safe, and efficient real-time digital payments
system. Just this April, we launched InstaPay to enable 24/7 low-value electronic transfers.
These initiatives should facilitate the shift from being a cash-heavy to a cash-lite economy, a
trend we observe happening across the globe.
Even as we provide an enabling environment for these technological innovations in the payments
ecosystem, the BSP "walks the talk" by exploring ways to digitalize our own payments
processes. You may have noticed that all medical reimbursements, regardless of amount, are
now being directly credited to the payroll account. Cashless payment options using QR codes
are now available at our canteen and cooperative stores. Soon, BSP employees may have the
option to open their payroll account with other domestic banks. Digitalization of travel
allowances, as well as of our payment collections, are also underway.
My fellow BSPers, much has changed since the BSP was established 25 years ago. Today, the
momentum for progress and reform has not diminished. I could not be prouder to say that we
have done this well and this much because of everyone's invaluable contributions to the cause.
For this, I, on behalf of the Monetary Board, also salute and honor the three Governors who came
before me-the late Governor Gabriel Singson, the late Governor Rafael Buenaventura, and
former Governor Amando Tetangco, Jr. who joins us today to celebrate with us.
Thomas Aquinas said, that "if the highest aim of a captain were to preserve his ship, he would
keep it in port forever." Under the capable leadership of our past Governors, we have travelled
far and have reached new points of opportunity.
As captain now of our navigating team, I am confident in the course we have charted under
"Continuity Plus Plus." I put my trust in the BSP crew, which has proven itself time and time
again to be capable and skilled.
We may be going through some strong headwinds today. But we stand undaunted. For BSP,
it's a matter of careful navigation and timely action. The economic ship itself is fundamentally
solid and sturdy. We'll get to better weather soon enough and sail on to destination.
As I close, I recall my mission as head of team BSP. It is not only to deliver on our mandates
today. Rather, it is to build capabilities to address challenges and develop skills needed to
conduct our mission given likely scenarios.... ready to respond where it matters... when it
matters. This is the rationale for the bold organizational changes we have embraced thus far.
These changes are meant to make the institution and its key officers more agile and resilient,
ready too - as individuals and as an organization - to navigate the future.
Let me recognize the crew:
DG Diwa Guinigundo and the Monetary and Economics Sector (MES)
DG Chuchi Fonacier and the Financial Supervision Sector (FSS)
DG Cyd Amador and the Corporate Services Sector (CSS)
AG Dahlia Luna and the Currency Management Sector (CMS)
Not to forget the Offices directly working with me and of course the Monetary Board:
 Carlos G. Dominguez III
 Felipe M. Medalla
 Juan De Zuniga, Jr.
 Peter B. Favila
 Antonio S. Abacan, Jr.
 V. Bruce J. Tolentino
Today, as always, we ready ourselves for more challenges ahead, taking stock of two-and-a-half
decades' worth of lessons and experiences.
Maraming salamat team BSP. Happy 25th Anniversary to us all! Mabuhay ang BSP! Mabuhay
ang bansang Pilipinas!