amando tetangco : philippine thrift banks in a changing environment speech by mr amando m tetangco, jr, governor of bangko sentral ng pilipinas ( bsp, the central bank of the philippines ), at the annual convention of the chamber of thrift banks, makati city, 14 march 2017. * * * the officers and members of the chamber of thrift banks under the leadership of president gregorio anonas iii, distinguished colleagues from the banking industry, special guests, ladies and gentlemen, good morning! it is always a pleasure to be with the ctb for your annual convention. today, i will discuss macroeconomic developments, the state of the thrift banking industry and how ctb members can redefine themselves in this constantly changing environment. macroeconomic conditions and prospects the good news is that in the midst of uncertain global economic conditions, our own macroeconomic fundamentals remain solid and intact. the philippine economy continued its growth story in 2016 with a full - year gdp1 growth of 6. 8 percent, higher than the 5. 8 percent growth achieved in 2015. this is also at the high end of the national government ’ s growth target of 6. 0 - 7. 0 percent for 2016. at this rate, the philippines has one of the fastest - growing economies in asia2. our growth was generally broad - based, fuelled by investments and consumption. strong domestic demand was underpinned by low inflation, a stable interest rate environment, and improving labor market conditions. over the policy horizon, we see inflation remaining manageable and within the government ’ s target range of 2 to 4 pct. meanwhile, our flexible exchange rate policy and adequate reserves3 continue to provide buffers against potential external shocks that can affect the domestic economy. sound and stable banking system the philippine banking system has remained a source of strength for our economy. resources of the banking system continue to grow at a steady pace and fund economic activities, with deposits rising to record levels. this affirms sustained public confidence in our banking system. in particular, the thrift banking sector continues to support the growth of the philippine banking system. consolidated assets expanded by 8. 3 percent and reached p1. 1 trillion as of enddecember 2016. industry assets breached the one trillion - peso mark for the first time in last year. at the same time, capitalization moved up by 6. 1 % while deposits increased by a robust 9. 7

csf ) program. this enabled cooperatives, without sufficient collateral, to access bank loans on the strength of a credit guarantee. the program was institutionalized through the passage of republic act no. 10744 also known as the “ credit surety fund cooperative act of 2015. ” this should further enhance msmes ’ access to credit. parallel to this, the bsp strengthened credit risk management guidelines for banks. this emphasizes cash flows and the “ ability to pay ” of a borrower in determining creditworthiness. through this regulation, the bsp is signalling that collaterals should play a secondary role in credit decisions. the same regulation exempts start - up enterprises from submitting documents evidencing financial capacity and business plans ; these documents are usually required from regular borrowers in the first three years of their banking relationship. moreover, to help channel funds to the agricultural and fisheries sector, the bsp approved the agricultural value chain financing ( vcf ) framework. by encouraging linkages among various players in an agricultural value chain, the credit risk of participating farmers can be reduced and thereby facilitate their access to credit. a study is now being conducted to expand this framework to cover the msme value chain. in particular, we are looking into potential regulatory incentives to further encourage msme financing. ladies and gentlemen. all these are being laid down, so that thrift banks can help meet the financing needs of msmes and the agriculture sector, in support of countryside development. this could be for investments, for working capital and for business expansion. 2 / 4 bis central bankers'speeches expanding physical and virtual reach on the issue of reach. currently, of the 1, 634 cities / municipalities in the country, 35. 6 percent are still considered unbanked. 8 establishing bank branches in less urbanized areas remains a challenge due to generally low population density, geographic inaccessibility, and prevailing socio - economic situations. these barriers pose a huge challenge to financial access. this is the reason why the bsp has set its sights on digital innovation as the primary catalyst to reaching greater scale. part of these initiatives is the approval by the bsp of the setting up of micro - banking offices ( mbos ), which as you know are low - cost banking infrastructure that can be established where it is not feasible to set up a regular branch. we have also put out regulations on e - money and mobile banking. recently, the bsp issued regulations allowing banks to use third party cash agents