amando m tetangco, jr : bsp and sss – moving towards a common vision speech by mr amando m tetangco, jr, governor of the central bank of the philippines ( bangko sentral ng pilipinas ), at the sss anniversary celebration, quezon city, 1 september 2009. * * * social security commission chairman thelmo cunanan, sss president and ceo sec. romulo neri, former sss president and ceo corazon de la paz - bernardo, distinguished members of the social security commission, past and present, coa chairman rey villar, other officers and staff of sss, fellow workers in government, special guests, members of the press, ladies and gentlemen, good morning. it is a pleasure to be part of the 52nd anniversary celebration of the sss, the philippine institution that has 28 million members or nearly one - third of our country ’ s population! indeed, the sss is one of the most important institutions in our country : it is the institution that has been providing support and protection to millions of its members who face financial challenges from sickness, disability, death, maternity, and other contingencies for 52 years now. this tells us that sss has been faithful in fulfilling its responsibilities to its members and that, in turn, its members continue to trust sss with their hard - earned money. for this, the men and women of the sss, past and present, deserve our appreciation and a long - round of applause! let us also give a big hand to all the balikat ng bayan awardees who are the exceptional bank partners and top employers that help the sss achieve its objectives and provide good service to its members. palakpakan din po natin sila! ladies and gentlemen, the continuing stability and strength of the sss is important not only for its members and employees but also for the economy as a whole. among others, each time it extends benefits to its members, the sss, in effect, reminds them of the value of regularly setting aside part of one ’ s income for the rainy days. this is important as it is the accumulated savings of our people that enable our banks to sustain lending for economic activities that generate and keep jobs. in turn, the new additions to the labor force keep on expanding the membership base of the sss. banks are also important conduits for the collection of sss premiums as well as for the distribution of

factor that accelerates capital inflows to take advantage of artificially low asset prices. therefore, a flexible macroeconomic framework geared to avoiding the buildup of overheating and that allows prompt asset price adjustment should be the main way to avoid excessive, especially speculative, capital inflows. but even if flows are not “ excessive ”, agents may undertake exposures that could be privately efficient, such as currency and maturity mismatches, but result in aggregate vulnerabilities. in these situations of moderate and fundamental - driven capital flows, the prevention of financial vulnerabilities resulting from exchange rate volatility should be addressed through financial regulation and financial development. in fact, this has been the case of chile, where the regulation of currency mismatches has prevented banks from excessive risk taking, and the deepening of the financial system has provided an increasing hedging capacity of the private sector. nonetheless, this approach is not free of situations like those experienced in some emerging market economies like mexico, brazil and south korea after the lehmann bankruptcy, where the un - regulated corporate sector became systemically important after the misuse of hedge instruments increased dramatically their exposure to exchange - rate risk. in this regard, strict rules for addressing excessive risktaking from financial intermediaries that fund these positions should be implemented. on the other hand, when a country is subject to a sudden surge of capital inflows due to the incentives associated with temporary macroeconomic and financial conditions, or due to sudden changes in the international investors ’ portfolio decisions, the inflation - targeting framework may be subject to important challenges. these challenges are particularly important when episodes of capital flows also result in inflationary pressures. under these circumstances, dealing with inflationary risk through interest - rate policy may generate further incentives for capitals inflows, exacerbating exchange rate volatility and even creating an over - appreciated currency. from the point of view of macroeconomic policies, this requires to ensure that fiscal policy is not what is inducing capital inflows. all considered, the pursuit of macro and financial stability in the context of an inflation target regime may call for some exceptional departure from a fully floating exchange rate and a highly integrated international financial market. this can take different forms, as they may require the use of non - interestrate policy, such as reserve requirements on bank deposits instead of the conventional interest rate policy ; a temporary reduction of the degree of financial integration, through the use of some sort of capital controls ;