amando m tetangco, jr : a responsive capital market – a step on the road beyond investment grade speech by mr amando m tetangco, jr, governor of bangko sentral ng pilipinas ( bsp, the central bank of the philippines ), at the philippines investment forum, organised by euromoney, manila, 18 february 2014. * * * i am pleased to join you for this philippines investment forum. events such as this organized by euromoney bring together the main stakeholders of our economy. through the various panel sessions, we are able to hear and exchange views, giving us a good sense of where the market pulse lies. it was certainly a privilege for all of us to have listened to no less than the president deliver the official keynote address. this shows you how serious the country ’ s policy makers are in reaching out to you who are among our economy ’ s main stakeholders. your work is central in enabling the public sector to effect true, broad - based and lasting change that supports the country ’ s continued development. the president ’ s address and the session before this one laid the groundwork for us to set our sights “ beyond investment grade ”. investment grade – how did we get here? indeed, we have seen that the road to investment grade was not easy... it was long and marked by reforms. reforms which include, first, a critical diversification of our growth sources and drivers to exploit and take advantage of our favourable demographics... second, a purposeful shoring up of our external position and strengthening of our banking system … knowing that a robust external position and strong bank balance sheets would allow us to ride out the turbulence from external financial shocks... and third, a resolute management of our fiscal house by steadily reducing our external debt, maintaining a healthy government debt profile, and firmly committing to reforms that would allow us to meet our intergenerational needs. investment grade – the near - term challenges our current operating environment continues to be very sensitive to global developments. of late, we have witnessed what some analysts called the “ rout ” in emerging markets, following uncertainty in the next steps of the fed. since the beginning of the year, investors have indiscriminately sold em debt, and the philippines was not spared. we saw the peso decline, the stock market index drop and government securities yields rise in the secondary market. alongside the fear of contagion from em sell -

for funds from banks and primary dealers. the federal reserve has also implemented several important temporary facilities to alleviate the pressures on money market mutual funds and commercial paper issuers. the emergency economic stabilization act ( eesa ), enacted by congress in early october, provides critically important new tools to address financial market problems. the troubled asset relief program ( tarp ), authorized by the legislation, allows the treasury to provide capital to financial institutions across a wide spectrum of sizes and to purchase or guarantee troubled mortgage - related and possibly other assets held by banks and other financial institutions. the eesa also temporarily raises the limit on the deposit insurance coverage provided by the federal deposit insurance corporation ( fdic ) from $ 100, 000 to $ 250, 000 per depositor and temporarily fully covers non - interest - bearing transactions accounts, such as payroll accounts. as you know, this latter action was aimed particularly at helping small businesses. in response to weakening macroeconomic activity and the increased downside risks to economic growth and employment implied by the recent escalation in financial market stress ( along with diminished upside risks to inflation ), the federal open market committee ( fomc ), in a coordinated effort with other central banks, lowered the target federal funds rate 50 basis points to 1 - 1 / 2 percent on october 8. this cut was followed by a further 50 basis point easing to 1 percent at the october fomc meeting. additionally, on november 12, the federal banking agencies released an interagency statement aimed at ensuring that all banking organizations fulfill their fundamental role in the economy as intermediaries of credit to businesses, consumers, and other creditworthy borrowers. 8 these actions should have a wide range of positive effects across the entire economy, including small businesses. policymakers'actions over the last two months in interbank funding markets, commercial paper markets, and the money market mutual fund industry should help restore market functioning and allow short - term funding to be directed to where the economy most needs it. likewise, the activities permitted as part of the eesa legislation should help rebuild confidence in the financial system, increase the liquidity of financial markets, and improve the ability of a broad range of financial institutions to raise capital from private sources. the expansion in the coverage of deposit insurance provided by the fdic should also bolster public confidence and provide additional liquidity to fdic - insured institutions. the fomc's cumulative 1 percentage point reduction in the federal funds rate in october, combined with previous reductions