benjamin e diokno : trust - living through the pandemic speech by mr benjamin e diokno, governor of bangko sentral ng pilipinas ( bsp, the central bank of the philippines ), at the trust officers association of the philippines'general membership meeting, 21 november 2021. * * * to the directors, officers, and members of the trust officers association of the philippines, guests, ladies and gentlemen, good afternoon! i welcome this opportunity to address the membership of the toap once again and touch base on developments since i last spoke at your general membership meeting in march of this year. it has now been more than 18 months since the pandemic reached philippine shores, and all of us – regulators, financial institutions, and clients alike – have learned to adapt to new ways of working, doing business, and living. economic performance things are looking up for the philippine economy. the country has just recorded two consecutive quarters of growth, following up the 12. 0 percent expansion registered in the second quarter of 2021 – the highest growth rate recorded since 1988 – with a 7. 1 percent expansion in gross domestic product in the third quarter. indeed, the third quarter growth surpassed expectations, leading to optimism for a more rapid return to pre - pandemic gdp levels. the economy remains on course to meet the government ’ s full year growth forecast, which is in the range of 4 to 5 percent inflation the bsp expects inflation to remain manageable. while headline inflation was at 4. 8 percent year - on - year in september, it decelerated to 4. 6 percent in october due to lower food inflation. while year - to - date average inflation stands at 4. 5 percent, above the target range of 2 to 4 percent, the latest outturn is in line with the bsp ’ s assessment that inflation will return to within the target range before year - end, then decline towards the midpoint over the next two years. this provides the bangko sentral with room to maintain its accommodative monetary policy stance and strongly support sustainable economic recovery. balance of payments the cumulative balance of payments position for 2021 stood at a deficit of us $ 665 million by end - september, reversing the surplus recorded in the same period last year. this can be largely attributed to the widening deficit in merchandise trade. the national government also saw its net foreign borrowings decrease. gross international reserves despite recording a month - on - month reduction,

the country ’ s gross international reserves remained substantial at us $ 108 billion. this buffer represents 10. 8 months ’ worth of import cover. it is also equivalent to about 5. 4 times the country ’ s short - term external debt based on residual maturity. domestic liquidity 1 / 5 bis central bankers'speeches meanwhile, domestic liquidity is ample. m3 rose by 8. 2 percent year - on - year to p14. 6 trillion in september 2021. the bsp is paying close attention to the dynamics of liquidity in the financial system with an eye toward supporting demand and economic activity. remittances remittances from overseas filipinos remain a reliable source of support for the economy. after a minimal contraction in 2020, cash remittances have rebounded this year. for the first nine months of the year, of remittances were 5. 6 percent higher than the comparable figure in 2020. stability of the banking system the philippine banking system is strong. total assets rose to p19. 9 trillion as of end - august 2021, and deposits are also on an upward trend, standing at p15. 5 trillion. this encourages us to look toward financial intermediation by supervised entities for support for our recovering economy. banks are well - capitalized. the capital adequacy ratios of the universal and commercial banking industry on solo and consolidated bases improved to 17. 0 percent and 17. 6 percent, respectively, in the first half of the year. these remain well above the 10. 0 percent minimum threshold set by the bsp. meanwhile, the gross non - performing loan ratio of the system continues to be manageable, standing at 4. 5 percent in end - august. the npl coverage ratio remains high at 83. 5 percent, providing confidence in banks ’ ability to absorb possible losses. performance of the trust industry the trust industry also continues to grow. after seeing a temporary reduction in the early days of the pandemic, trust assets have rebounded, and have now significantly surpassed pre - pandemic levels. assets under management recorded a double - digit year - on - year expansion of 18. 4 percent, aggregating to p4. 8 trillion by end - june 2021. this is equivalent to 24. 3 percent of the banking system ’ s total assets. the related increase in fees and commissions contributed to the sustained profitability of the industry. the net income of trust institutions rose by p1. 0 billion or 33