amando m tetangco, jr : the bsp and its partners – standing up to the global challenges today speech by mr amando m tetangco, jr, governor of the central bank of the philippines ( bangko sentral ng pilipinas ), at the stakeholders awards and appreciation lunch for 2009, central bank of the philippines, manila, 14 july 2009. * * * distinguished partners and special guests from the private and government sectors, good morning. on behalf of the monetary board and my colleagues at the bangko sentral ng pilipinas, i thank all of you for joining us today for our stakeholders awarding ceremony and appreciation lunch. as you can tell, this event is important to us. this is the time of the year when the bangko sentral ng pilipinas honors its partners who provide outstanding support to our information and statistical requirements, as well as to our advocacy programs. this year's stakeholders awards is made more special by the fact that our partnership has gone through a particularly challenging period that saw the worst global financial crisis and the most severe economic downturn in decades. while the epicenter of the financial turmoil is in the us, shockwaves are being felt worldwide, even in emerging economies such as the philippines. thus, the theme for our 2009 awarding ceremony is most appropriate : " the bsp & its partners : standing up to the global challenges today. " indeed, we are here today standing up together because we kept our partnership strong and fully functioning even in the midst of a global crisis. you honored your commitment to the bangko sentral, stood by us, and never failed to send us your comprehensive reports on time. thus, the bangko sentral ng pilipinas and our economy benefited from receiving your complete and reliable information on which to base our policy decisions. for this, we give all of you your initial award today : a well - deserved long round of applause. ladies and gentlemen, the first group of stakeholders we will recognize today are the outstanding respondents to the following bsp surveys : the business expectations survey ; cross - border transactions survey ; foreign direct investment survey ; coordinated portfolio investment survey ; and survey on it and it - enabled services. we will also give awards to other institutions that provide valuable information for the formulation of monetary policy in accordance with the bsp's key mandate to promote price stability conducive to balanced and sustainable economic growth. the framework for our monetary policy is inflation targeting – a forward -

is improving, though only gradually. a return of new npl flows to normal values will reduce the cost of credit risk. more intensive economic activity will spur households ’ and firms ’ demand for loans and financial services ; eventually, profits could be boosted by higher interest rates. however, it is still unclear how much of the drop in banks ’ net income is due to the economic cycle and how much to long - term factors. the growth in lending to firms may continue to be hampered by the ample supply of internal funds. the non - financial corporations sector has been a net creditor of the other sectors of the economy since 2012 ; this is an anomaly with respect to the past, but one that is also present worldwide. the modest expansion in lending to firms can also be put down to a gradual strengthening of their financial structure. since 2011, leverage ( i. e. the ratio of financial debt to its sum with net equity ) has diminished by 7 percentage points. the share of bonds in total financial debt has risen by 5 percentage points, to 11 per cent ; the proportion of bank loans has similarly diminished. initially, the switch between the two types of financing concerned only a small number of firms, typically the big industrial groups already active on the bond market ; it has now spread to small firms as well. the greater financial soundness of firms and their more diversified sources of finance are a positive, long - sought - after, development. if the trend takes root, it will make italy ’ s financial system more resilient by splitting macroeconomic risk among a much larger number of investors. for many banks, however, it will potentially reduce credit and income growth. the challenge is to exploit the large pool of information on firms and on the economic system to offer new services. this process requires qualified human resources and an ability to interact with investors and markets without entering into any conflict of interest. the sweeping reform of the rules on bank capital launched in the aftermath of the crisis significantly increased the quantity and quality of own funds and inevitably put pressure on profitability. going forward, the completion of basel iii, the introduction in europe of requirements regarding loss - absorbing liabilities in situations of crisis, and the adoption of new accounting rules for write - downs on loans will bring further pressure to bear, notably on the cost of wholesale funding. for the banks that are unable to withstand this pressure it is important to prepare in advance measures that will make it as easy as possible for them to leave the market by means