benjamin e diokno : laying the groundwork for the post covid - 19 era speech ( via webcast ) by mr benjamin e diokno, governor of bangko sentral ng pilipinas ( bsp, the central bank of the philippines ), at the standard chartered bank asean webinar series, 18 september 2020. * * * good afternoon, everyone. it is my pleasure to join you today in the philippines leg of standard chartered bank ’ s asean webinar series. my address this afternoon will focus on three main points. first, i will discuss the policy measures deployed by the bsp in response to the coronavirus pandemic. second, i will elaborate on the legislative measures we are pushing for, as we lay the foundation for a more resilient economy in the medium term. these proposed laws will strengthen the financial sector and enable the bsp to deliver more inclusive services to the filipino people. finally, i will conclude by sharing our vision for the philippines as we usher in the “ new economy. ” first, on the bsp ’ s policy response. as you know, the coronavirus pandemic called for aggressive, timely, and unprecedented responses from governments across the globe. in the philippines, when the covid - 19 virus appeared towards the end of the first quarter, we knew that we have to take decisive actions. for the bsp, we identified four critical functions within our area that are imperative to keep the economy afloat : ensure that there is sufficient liquidity in the system shore up market confidence and cushion slowdown of economic activity sustain financial stability and extend relief to financial institutions ; and promote access to and delivery of financial services the bsp swiftly deployed an initial set of measures meant to help maintain stability and ample liquidity in the financial system. first, bsp entered into a php 300 billion repurchase agreement with the national government and advance remittance of php 20 billion worth of dividends to augment the government ’ s funds for covid response. second, bsp purchased government securities in the secondary market. third, bsp temporarily suspended term deposit facility auctions, and reduced the overnight reverse repurchase volume offering to encourage market participants to channel funds to loans or government securities. from the onset of the pandemic, the government has been firm : its topmost priority is to save lives and protect livelihoods. in line with this, the government imposed stringent lockdown measures in mid - march

faced impairments in the transmission process during the crisis – that is why, for example, the fed began intervening in markets for mortgage - backed securities, or the bank of england launched its funding - for - lending programme. but it is clear that those impairments have been more severe in the euro area. and moreover, they have had a distinct regional dimension that was not visible in other jurisdictions. see ben bernanke, 2015. “ federal reserve policy in an international context ”, paper presented at the 16th jacques polak annual research conference hosted by the international monetary fund, november 5 – 6, 2015. see johannes grab & georgios georgiadis, 2015. “ global financial market impact of the announcement of the ecb ’ s extended asset purchase programme ”, federal reserve bank of dallas globalization and monetary policy institute working paper no. 232, march. bis central bankers ’ speeches our specific challenge arises from having an incomplete banking and capital market, which leads to lower sharing of risks. relative to a fully integrated market, portfolios of private assets in the euro area are less geographically diversified, concentrating the effect of local economic slumps. credit markets are less integrated, making it harder for agents to borrow from other parts of the union to smooth out such shocks. and institutions for cross - border public risk - sharing are less developed, placing the full burden of dealing with the after - effects on individual sovereigns. this has two consequences for monetary transmission. first, it means that some of the main transmission channels – namely the bank lending channel and the balance sheet channel – are more likely to be disrupted in the event of major shocks. and second, since private risk and sovereign risk are linked at the national level, it means that financial fragmentation takes place along national lines. that hampers the traction of monetary policy in the regions where monetary stimulus is most needed. none of this means we cannot fulfill our mandate. but it does mean we have to design our instruments to compensate for it. that is why, for large parts of the crisis, our measures were also geared towards addressing impairments in the smooth transmission of our policy. early on in the crisis, this meant substituting for the drying up of the interbank market, including at longer maturities, to ensure the flow of cross - border liquidity. later, we took out unwarranted redenomination risks from sovereign debt markets, helping attenuate the banksovereign nexus. more recently, we have launched a credit easing