’ s monetary operations with international central banking practices, encourage active and dynamic liquidity management by banks, and afford the bsp with more operational flexibility. consultations on the proposed irc refinements shall continue. we now see scope for further reduction on the rrr as we see inflation returning firmly to within target and with inflation expectations stabilizing. second, we stay committed to the micro and macroprudential measures we implemented to ensure financial stability. recently, the monetary board approved the adoption of the countercyclical capital buffer ( ccyb ) on universal and commercial banks, as well as their subsidiary banks and quasi - banks to prevent excessive credit growth. this policy expands our toolkit for systemic risk management. it is specifically designed to provide a steadying hand to counter the common occurrence of boom - and - bust periods within the financial cycle. banks are to set aside additional capital as reserves during good times to prepare us for bad times. we are also pursuing enhancements on operational risk management standards. two key reforms in this area include issuance of standards on model risk management and reputational risk management. we will also be issuing guidelines on risk - based approach to pricing to help ensure that exposures of banks / financial institutions to risks associated with lending / financing activities are adequately compensated. third, the bsp recognizes the fundamental need to create a secure, reliable and efficient digital financial ecosystem where all these innovations can come together to achieve the greatest synergy. as such, after the operationalization of pesonet and instapay, the bsp is now exploring further enhancements to the large value payment system. we do this even as the private sector contemplates other automated clearing houses ( achs ) for other useful retail payment schemes. current efforts also include development of an inter - operable national quick response ( qr ) code standard to accelerate the digitalization of merchants to close the loop on the digital payment system. in relation to this, we at the bangko sentral ng pilipinas, thank you in the banking and the non3 / 4 bis central bankers'speeches bank financial community for going beyond just complying with financial regulations. you proactively responded to emerging developments and challenges such as our transition from being a cash - heavy to a cash - lite economy with the implementation of the national retail payment system ( nrps )! salamat sa inyo. fourth, we remain on course in promoting financial deepening, with measures

interest rate environment : to what extent are longterm interest rates low because investors expect short - term rates to be low in the future due to some underlying softness in aggregate demand, and to what extent do low long rates reflect narrow term premiums, perhaps induced by well - anchored inflation expectations or low macroeconomic volatility? clearly, the policy implications of these two alternative explanations are very different. while judging investors'expectations is important when setting monetary policy, so is understanding investors'sense of the distribution of possible outcomes around those expectations. market risk premiums may well be an input into our own perceptions of the range of possible economic outcomes, and our policy actions can be influenced by those perceptions. for example, our reaction to a scenario in which inflation is low and is expected to vary within a narrow band would presumably be different than our reaction to an alternative scenario in which inflation uncertainty was high and there was a significant chance of entering a deflationary environment. thus, we are also interested in risk premiums as indicators of uncertainty and not solely as inputs into accurate readings of investors'mean economic outlook. so far i have largely considered risk premiums as indicators of economic conditions, but they can also directly affect real economic activity. for example, the decline in term premiums in the treasury market of late may have contributed to keeping long - term interest rates relatively low and, consequently, may have supported the housing sector and consumer spending more generally. also, risk premiums may be, in part, a manifestation of investor sentiment, which in turn may be correlated with consumer and business sentiment. accordingly, it is possible that risk premiums may reflect broader " animal spirits " in a keynesian sense, and thus they could be a marker for shifts in underlying business and consumer spending trends. consider the dramatic example of the turnaround in equity markets from 2000 to 2003 : the pullback of both real and financial risk - taking that accompanied it surely was a significant drag on the economy. risk premiums may even have a role in credit cycles : some research here at the board has shown that corporate bonds issued when risk premiums are low default at a higher rate than bonds issued when risk premiums are high, even when conditioning on their observable risk. 2 other research has drawn similar underperformance conclusions about stock returns following initial public offerings. 3 finally, risk premiums are also important tools for monitoring financial stability. a strong, stable financial system is of vital importance both for a robust