. in tandem with the national government ’ s efforts, the bangko sentral ng pilipinas implemented its own list of covid - response measures. first, we cut policy rate by a cumulative 200 basis points to a record low of two percent. this move helped stimulate provision of credit to productive activities. we reduced the reserve requirement against deposit and deposit substitute liabilities. for universal - commercial banks and non - bank financial institutions with quasi - banking functions, we cut the reserve requirement from 14 percent to 12 percent effective april 3, 2020. for thrift banks and rural - cooperative banks, we reduced it from 4 percent to 3 percent effective july 31, 2020. second, we extended short - term provisional advances to the national government and purchased government securities in the secondary market to help finance its covid - 19 - response programs. in sum, the bsp has injected over php2. 2 trillion or approximately usd 41. 9 billion into the financial system. this is equivalent to about 11. 2 percent of the gdp. and third, the bsp put in place key regulatory and operational relief measures for banks. these measures helped calm down the market, maintain the financial system ’ s stability, and ensure the public ’ s continued access to financial services. even as the country transitions from one administration to another, the bangko sentral ng pilipinas will continue to fulfill its mandate of ensuring sound macroeconomic management. on the whole, there are clear signs that the new administration will continue the key reforms and programs of the outgoing administration. as the economy recovers, the bsp recognizes the need to scale back its extraordinary measures. the timing and conditions of the bsp ’ s exit strategy will continue to be guided by the inflation and growth outlook over the medium term, the state of public health, and domestic and global risks to the economy. economies with strong fundamentals tend to handle crises better. as such, it pays to strengthen fundamentals during good times so that the economy has buffers against shocks in bad times. in the case of the philippines, it entered the pandemic with strong macroeconomic fundamentals. its healthy external accounts and hefty gross international reserves served as buffer during the pandemic. the government ’ s fiscal space allowed it to finance its huge covid - 19 response without incurring unmanageable public sector debts. the government ’ s comprehensive tax reform program strengthened the country ’ s fiscal house. the ctrp, which simplified the tax

term money markets. unpredictable and uncertain world. in this case, for market participants who want to behave rationally, the most natural course is to assume the most pessimistic scenario and make the best of it. 6 such market participants will react more readily to bad news, to information about the worst conceivable circumstances, than they will to good news. what is more, in situations such as these, market participants tend to adopt a strategy of standing still until confidence has been restored. 7 actions that may be rational at the level of individual market participants can lead to a " fallacy of composition, " which delays the restoration of functions for the market as a whole. 4. institutional issues on the financial system i would next like to explore the background of the current financial crisis from the following two perspectives : monetary policy implementation and financial system design. let me begin by considering monetary policy in the context of the so - called “ bubble ” phenomena. it is extremely difficult for central banks to be aware in real time of the emergence and collapse of “ bubbles ”. 8 there are two schools of thought about how to deal with bubbles. one says that you should wait and clean up after the collapse because it is difficult to be aware of bubbles as they emerge. the other argues that they should be dealt with quickly by reading the signs of a bubble from numerous indicators like asset prices. both positions, however, acknowledge that it is difficult to identify the emergence and collapse of bubbles in real time. when a large bubble collapses and severely damages the financial system, monetary policy has extremely limited effects, as we have seen in the current financial crisis. furthermore, if the process of bubble formation involves " greenspan put " - type expectations among market participants, it may lead to excessive risk - taking activities. thus, the current financial crisis raises the extraordinarily difficult question of how central banks should conduct monetary policies to stabilize financial systems, and ultimately, economies. while it is very important that this be discussed in detail, i will refrain from doing so in my remarks today because i wish to highlight another important question regarding the design of financial systems. the “ credit bubble ” and its collapse we have witnessed have resulted in a growing impetus in europe and the united states to reconsider the existing regulatory framework. in the background is the financial deregulation that made great strides after the 1990s. the united states, under the glass - steagall act, maintained a clear delineation between the banking