all asset portfolios at every moment. that would not be the case if all financial markets would obey to the canons of perfect competition, would process information with full efficiency and would not be subject to overshooting, herd behaviour and price misalignments during significant periods of time. as this does not correspond to the real world, full fair value tends to create what has been dubbed as “ artificial volatility ” in a company ’ s earnings, particularly in the case of financial institutions. when profits are artificially inflated, this may lead to higher dividends and bonuses based on the recognition of unrealised gains. the undesirable side effect of such payments would be an effective depletion of capital ; a capital cushion that might be needed at a later stage when the markets correct. in some cases fair value accounting may provide information that is in my view outright wrong even for investors. consider the recent example of a swiss bank. the bank ’ s recently published first quarter results was only sfr 44m bis central bankers ’ speeches because the bank had to recognise losses in the range of sfr 1. 5 bn from an improvement in its own creditworthiness that raised the value of its own debt securities. presumably the opposite occurred in some previous year, meaning recognition of profits, when it may have suffered a decrease in its rating. it is doubtful that this, in my view, distorted information provides the right incentives for proper risk management and can indeed be considered to be “ useful ”, which is a stated objective that accounting should meet in line with the iasb ’ s conceptual framework. from a financial stability perspective, the impact of “ short - termism ” and volatility of accounting information can be very detrimental as both may aggravate pro - cyclicality. this means more severe downturns and more acute building up of risks, resulting in a misallocation of resources that lead to an overall welfare loss for society. this is also consistent with the findings of a recent paper by the federal reserve bank of boston1 which also concluded that implementing fair value accounting more broadly may not necessarily provide financial statement users with more transparent and useful reporting. additionally, it stressed that financial stability may be negatively impacted by fair value accounting due to the interconnectedness of financial institutions, markets and the broader economy. the second example where accounting seems to have an impact on market dynamics and cyclicality within the financial system is the provisioning or impairment methodology the main criticism of the “ incurred

amando m tetangco, jr : citi microentrepreneurship awards – more than an awards program speech by mr amando m tetangco, jr, governor of bangko sentral ng pilipinas ( bsp, the central bank of the philippines ), at the media launch of the 2014 citi microentrepreneurship awards ( cma ), manila, 18 june 2014. * * * citi philippines ceo batara sianturi ; our 2013 citi microentrepreneurship awardees ; colleagues from the bsp ; fellow advocates of microfinance ; our special guests from the media ; ladies and gentlemen, good morning! i am pleased to confirm the good news : the microfinance sector continues to grow and empower more microentrepreneurs across the philippines. as of september 2013, 183 banks provided 8. 1 billion pesos in microfinance loans to over a million borrowers – 1, 017, 351 pinoys to be exact. this translates to an average bank loan of eight thousand pesos per borrower. seven years ago – in december 2006, the total microfinance loan portfolio of banks was 4 billion pesos for 650, 000 borrowers or an average of 6, 150 pesos per borrower. in other words, bank loans to microenterprises increased by 102 % in seven years, while the number of microentrepreneurs who accessed micro loans from banks increased by 56 %. over the same period, average micro loans increased by 30 %. equally significant, the accumulated bank savings of microentrepreneurs jumped from p1. 4 billion in 2006 to p8. 8 billion, an increase of 525 %. this means the average deposit per microentrepreneur increased from two thousand pesos in 2006 to 8, 650 pesos in 2013, an improvement of 332 % in seven years. we realize these are cold figures. however, the stories behind these figures prove the power of microfinance to transform and improve lives. as co - chair of the selection committee for cma for 10 years now, i have personally witnessed how microentrepreneurs survived scarcity by making their business a reliable source of family income – all because they accessed and sensibly used microfinance loans. as a regulator, it is a joy to see tangible proof that our microfinance policies and regulations have such a powerful