Amando M Tetangco, Jr: The pursuit of financial stability - a daunting
but necessary prudential agenda
Speech by Mr Amando M Tetangco, Jr, Governor of Bangko Sentral ng Pilipinas (BSP, the
central bank of the Philippines), at the Financial Stability Co-ordination Council (FSCC) MOA
signing, Manila, 29 January 2014.
* * *
Securities and Exchange Commission Chairperson Teresita Herbosa, Insurance
Commissioner Emmanuel Dooc, Philippine Deposit Insurance Corporation President Valentin
Araneta, National Treasurer Rosalia De Leon, representing DoF Secretary Cesar Purisima,
members of the Monetary Board, our partners from the various government institutions, my
colleagues from the Bangko Sentral ng Pilipinas, members of the media, ladies and
gentlemen, good morning.
The BSP is honored to host this signing of the Memorandum of Agreement formalizing the
creation of the Financial Stability Coordination Council.
Today, the five agencies represented here - the DoF, SEC, IC, PDIC, and the BSP - publicly
affirm our collective resolve to pursue financial stability as the norm for prudential policy.
With that resolve comes the commitment to identify, monitor and mitigate the build-up of
system-wide financial risks and deploy as necessary so-called macroprudential measures.
The bigger picture
This is certainly not the first time that we have publicly mentioned financial stability and our
desire to make it the pillar of financial market oversight.
However, financial stability is prone to being misunderstood, if not under-appreciated.
Perhaps, it is the sheer enormity of the tasks ahead that creates confusion. Or perhaps, it is
the absence of a holistic and formalized textbook framework that makes the journey to
financial stability and maintaining it quite daunting.
The financial stability agenda talks of co-mingled risks, and systemic consequences. This is
not the type of language or focus that we have been used to in organizing our prudential
oversight of our respective segments of the financial market. Yet, the dislocation that comes
with financial instability has been very evident for everyone to see and, unfortunately, for
many jurisdictions to experience.
From the breakdown of Wall Street to the difficulties in the Eurozone and general
weaknesses in consumer protection, we saw for ourselves how previously unmonitored and
unrecognized risks could create system-wide consequences that are a burden borne
ultimately by financial consumers.
The global reform agenda is thus designed precisely to prevent the recurrence of
dislocations whose magnitudes are felt worldwide.
The Basel 3 Accord, Financial Market Infrastructures, systemically important financial
institutions, corporate leverage, liquidity, shadow banking, large exposures,
interconnectedness, managing capital flows, OTC derivatives, consumer protection.
These are but some of the components of the evolving global reform agenda. The change
institutionalized by each one of these is structured precisely to better achieve financial
stability.
The significance of the MoA
This is why today's event is nothing short of a milestone.
The five institutions represented here publicly recognize that financial stability matters. We
appreciate that the task is extensive and challenging but we are driven by our common
commitment to nurturing the gains that we have already achieved by recognizing the intricate
nature of financial risks.
This healthy respect for financial risks balances the rewards that we can reasonably expect
from such exposures as against the need to remain prudent in taking on acceptable risks.
We likewise fully appreciate that each of the institutions will continue to oversee their
respective markets and/or pursue their respective mandates. But the financial system is
certainly much more than the collective sum of the parts. This synergy brings forth the risks
and rewards that are at the heart of financial stability.
The progress thus far
Ladies and gentlemen, we mark a historic day for the financial system by signing a document
that binds five financial authorities towards pursuing the financial stability agenda.
The truth is that our work on financial stability does not only start today. The various
committees have invested their time and effort for over a year now. They have been
evaluating global, regional, local developments, with the end in view of pro-actively
positioning our financial market for evolving challenges.
For the silent but diligent work that the five workstreams, our steering committee and the
administrative team have put forward to-date, we in the Executive Committee sincerely thank
you. We recognize the enormous challenge before you and as a small token of our
appreciation of your efforts, may I call on everyone to give these men and women a hearty
round of applause.
With a collective commitment and a shared responsibility to implement the financial stability
agenda, I am sure that we will be able to rise to this challenge.
Thank you very much and I wish you all a pleasant day.