as a costeffective service delivery channel. with cash agents, banks will be able to strategically leverage on innovative digital banking solutions and expand markets, even in the low - income and far - flung areas. while financial innovation is revolutionizing the manner of delivering banking products and services, it has pluses and minuses. the opportunities fintech brings come with heightened market competition and threats from cyber - attacks. these have significant implications on banks ’ risk management and consumer protection frameworks. being ready for competition thrift banks should also be ready for competition. internally, from the larger banks that are expanding their networks into tbs ’ traditional market of consumer finance. and, also from the entry of foreign banks. if you recall, the local banking industry has been opened up to foreign competition with the enactment of ra 10641 in 2014 9. so far, two foreign banks 10 acquired existing domestic thrift banks following the passage of the said law. while these forces may put pressure on thrift banks, competition creates more options for the consumer, in particular, and raises economic welfare, in general. thrift banks would therefore be served well if they would view competition such as this — as the impetus for “ raising their game ”. it certainly cannot be business as usual for the industry. indeed, there are many opportunities to better serve your chosen markets. in pursuing these opportunities, we enjoin you to remain prudent. in this increasingly integrated and globalized financial environment, it is important for thrift banks to always be guided by the tenets of effective risk management and sound governance standards. a changing global environment thrift banks should fully prepare to address the risks and challenges that will come with growth opportunities in this rapidly changing business environment. in addition, the industry should be mindful that loan exposures to particular market segments — such as consumers, msmes11 and agriculture — are vulnerable to market shocks. this is very relevant during this period when the fed is broadly expected to proceed with its next steps toward interest rate normalization. while you have heard me say that the bsp will not necessarily move in sync with the fed and that our courses of action remain data dependent, we must be mindful of heightened volatility in the fx market during this transition to fed normalization. we also need to be watchful of changes in global growth and inflation dynamics. all of these, in addition to our own domestic concerns that include exposures to natural calamities. 3 / 4 bis central

a credible long - term plan is announced in time. although fiscal adjustment itself may be gradual, it is important to announce a credible road - map for fiscal consolidation as soon as possible. with a credible road - map, and a consistent step - by - step implementation of the consolidation measures that it involves, the uncertainty diminishes or perhaps even vanishes completely. as a consequence, fiscal consolidation pushes the economy towards a durable recovery. in addition, fiscal consolidation must be well - targeted. permanent measures are preferable to temporary ones. often one - off actions take the form of asset sales or sale and lease - back operations that temporarily improve budget deficits. although such measures temporarily reduce the official deficit numbers, their one - off nature suggests unwillingness to change the fiscal stance structurally and to support them through a credible longer - term policy. in contrast, permanent measures can be expected to lead to positive expectation effects. see trichet ( 2010 ). barro ( 1979 ) and barro ( 1989 ). on overview of empirical evidence on non - keynesian effects is given in briotti ( 2005 ). giavazzi and pagano ( 1990 ) and blanchard ( 1990 ) investigate experience of ireland ( 1987 – 89 ) and denmark ( 1983 – 86 ), and argue that a reduction in public spending, through positive confidence and expectation effects led to expansion in the private sector also in the short term. see table 1 on page 8 in haugh et al. ( 2009 ) for an overview of the literature on the estimated impact of fiscal variables on interest rates. see among other, alesina et al. ( 1992 ), ardagna et al. ( 2007 ), bernoth et al. ( 2006 ). schuknecht et al. ( 2010 ). research suggests that fiscal consolidations targeted at reductions in spending and government wage bill are likely to be more successful than consolidations based on tax increases. one of the possible reasons why increases in taxes can hamper consolidation efforts is that they raise unit labour costs if unions do not accept real income cuts. 22 indeed, often fiscal imbalances and a loss of competitiveness are intertwined. more generally, fiscal consolidation measures that support structural reform and productivity growth will tend to have more positive effects. 2. the role of central banks let me now turn to central banks. their role as anchors of stability is all the more important in times of deleveraging. a credible, medium - term orientation on price