benjamin e diokno : launch of the first digital financial inclusion awards speech by mr benjamin e diokno, governor of bangko sentral ng pilipinas ( bsp, the central bank of the philippines ), at the launch of the first digital financial inclusion awards, manila, 13 march 2022. * * * citi philippines ceo, mr. aftab ahmed ; officers from the microfinance council of the philippines, inc. ( mcpi ) headed by mr. eduardo c. jimenez ; colleagues in the bsp ; fellow financial inclusion advocates ; and friends from the media : good afternoon. it is my pleasure to be with you today to celebrate another milestone with the launch of the first digital financial inclusion awards or dfia. the inaugural dfia marks a new chapter in the enduring partnership of citi philippines, mcpi, and bsp, which began in 2002 with the citi microentrepreneurship awards or cma. apart from building on the successful run of the cma, the dfia coincides with the launch of the new national strategy for financial inclusion or nsfi 2022 – 2028, which focuses on advancing inclusive digital finance and the financing access of micro, small, and medium enterprises or msmes. the dfia is also a timely awards program that reflects the experiences, insights, and lessons learned from the covid - 19 pandemic and conveys our commitment to ensure that every filipino – every microentrepreneur – has the means to flourish in the new, digital economy. for the bsp ’ s part, we remain steadfast in spearheading digitalization efforts and programs supporting msmes and the microfinance sector, which serve as financial lifelines for our microentrepreneurs. our initiatives include bringing digital payments closer to the people by promoting its use in the most common transaction points for most filipinos — the community markets and local transportation services such as tricycles. as such, we continue to actively support the implementation of philsys, our national digital id system. with its e - kyc functionality, philsys will streamline and enhance the onboarding capability of mfis, making it less costly for both the financial institution and the consumer. we also continue to facilitate capacity building and technical assistance for digitalization initiatives of the microfinance sector. there are also efforts to promote responsible use of alternative data to benefit msmes and unbanked individuals with little

, to improve the bank's governance and risk management. iv. boards, through the nomination and remuneration committees, must ensure that management remuneration is not only tied to short - term profits but takes into account long - term materialisation of risks and that appropriate ex - ante and expost checks for assessment are built into the compensation systems. v. boards must ensure a suitable policy framework for its own assessment for effectiveness, in accordance with their strategies and risk profiles. the effectiveness must be tracked at all levels - individual director, committee, and overall board. a well - qualified, engaged, and vigilant board can prevent management failures. importance of assurance functions the importance of assurance functions has already been stressed by both governor and dg shri jain. the reserve bank has also issued guidelines on supervisory expectations and for providing sufficient authority, resources and independence to these functions, among others. the board is expected to take an active role in 3 / 5 bis - central bankers'speeches identifying / approving the head of control and assurance functions. clear lines of communication between the board / board committees and heads of control and assurance functions are also mandated to ensure that information exchange happens regularly, and areas of concern and probable remediation can be identified well within time. recognising its criticality, supervision has also focused on business models and governance during the supervisory reviews. dg also referred supervision as the fifth line of defence. the classic three lines of defence are clearly under the remit of the board with audit being an independent check and supervision being the final line of defence / oversight. here the governance framework set out by the board should ensure that the three lines of defence do the job as expected – much like in the game of football, where the forwards, the midfielder and the defenders should collectively keep the ball in play and ensure that the supervisor as a goalkeeper is not engaged. coming to the link between regulation and governance, let me say that the regulators usually decide the regulatory perimeter and guide the regulated entities so that there are no accidents and surprises. while it is for the regulators to issue instructions that enjoin upon banks to adopt the best practices insofar as governance is concerned, it is for the board to set the strategic direction, engage with management, and conduct review of key policies and frameworks. the boards should manage alignment of performance with pay as well as enforce accountability to ensure adherence to the best practices while achieving the objectives set for the bank by the board.