philosopher aristotle once said “ one swallow does not a summer make. ” from the philippine perspective, we move forward in 2016 with cautious optimism. we are cautious – because we are mindful of the challenges ahead and of the possibility that our operating environment can change so swiftly at a scale we may not have anticipated. yet we are optimistic because we start from a position of strength, having managed to address obstacles we encountered in 2015 and the great financial crisis in 2007 – 2008. at this point, it will be helpful if i give an assessment of 2015 and then move on to 2016. after i complete my narrative, you can make your own judgment on the state of our economy. recalling 2015 2015 brought with it, its own challenges and opportunities. global growth remained uneven, resulting in a divergence in policy responses from major central banks – the us fed finally went ahead with its much - awaited “ lift - off ” and raised interest rates ; china devalued its currency ; while the european central bank provided further stimulus to its economy with interest rate cuts and an expanded bond purchase program. bis central bankers ’ speeches these external headwinds made for some rough sailing for the philippines in 2015 due to higher risk aversion among investors. some capital flowed out particularly in the second half of the year, the philippine stock market took a hit and the peso depreciated. there were similar shifts in financial markets across emerging asia. nevertheless, domestic sources of resilience kept the philippine economy on a steady noninflationary growth. low and stable inflation – 1. 4 % in 2015, the lowest since the bsp adopted the inflation targeting framework in 2002 – continued to encourage investments and business expansion. in the third quarter of 2015, our economy grew at an accelerated pace of 6. 0 percent. this made the philippines one of the fastest - growing economies in asia in the first nine months last year. at the same time, the country ’ s sound, stable and liquid banking system provided solid support to our economy in 2015, with bank lending continuing to grow in double - digit rates, with credit flowing particularly to the productive sectors. and as a result of the continuing cooperation between the bsp and the banking sector to continue to enhance governance and risk management practices of banks, industry profitability improved further with return on equity rising from 9. 67 % in september 2014 to 10. 04 % in september 2015 ; asset quality got even better with gross npl ratio improving to 2. 32

sustainable financing. more respondent banks view such mode of financing as highly important. finally, banks intend to maintain capital and liquidity buffers at levels higher than domestic and global standards to promote institutional stability. the bsp will continue to push for major reforms to ensure the soundness, stability, resilience and inclusivity of the banking system amid the ongoing health crisis. the bsp ’ s strategic regulatory and supervisory thrusts focus on three key areas, namely : strengthening risk governance ; ( 2 ) promoting responsible and responsive innovation ; and advancing the sustainability agenda in the financial system. the pandemic triggered a strategic review of business models and business priorities due to the changing business landscape. this highlights the importance of having strong risk governance. the bsp will continue to raise the bar in managing risk to ensure that the financial industry remains resilient to threats to financial stability. in this respect, we expect three things from banks : 1. we expect banks to build buffers and adopt robust stress testing methodologies so that they will be able to timely identify emerging risks, anticipate the occurrence of new risk triggers and prepare for their occurrence. 2. we expect banks to adopt more resilient systems to fend off the increase in cyber threat actors as the industry becomes largely digitalized. 3. finally, we also expect banks to continuously adhere to the tenets of good governance and protect the interest of the public even with the reduced face to face interaction with their clients. recent issuances of the bangko sentral are all directed toward this end. for instance, the bsp recognizes that building and sustaining a good reputation is a critical element in promoting a bank ’ s safety and soundness. since reputational risk is inextricably linked to other risk exposures such as credit, market, liquidity, and operational risks, it can be triggered by any risk such as for instance an unfavorable feedback from a client. circular no. 1114 or the guidelines on reputational risk management recognizes that everyone in the organization has a role to play in the management of reputational risk. said guidelines highlight the importance of shared accountability and has set out the roles and responsibilities of the board of directors and officers, consistent with the principle that the tone of good governance should come from the top. in the same vein, the bsp issued circular no. 1112 requiring banks to observe due diligence in the recruitment of their personnel. the “ know your employee ” rule