benjamin e diokno : micro, small and medium - sized enterprises ( msme ) message by mr benjamin e diokno, governor of bangko sentral ng pilipinas ( bsp, the central bank of the philippines ), for the msme ( micro, small and medium - sized enterprises ) day “ negosyo bounce back ”, 18 july 2021. * * * a pleasant morning to all the speakers and participants of today ’ s webinar entitled “ msme day : negosyo bounce back ”. thank you investree philippines for this initiative, which aims to inspire and equip our entrepreneurs towards business recovery and growth through innovative financing solutions. the bangko sentral ng pilipinas ( bsp ) has always supported programs that will steer the country ’ s economy towards a strong and sustainable path to recovery. as more vaccines arrive, and as a greater share of the population gets vaccinated, we move closer towards a new economy that is ‘ better, safer, and more technologically ready '. msmes in the new economy msmes are agile to adapt their business ventures to this new economy. they have taken advantage of the opportunities brought about by digitalization, such as e - commerce and digital payments. in fact, data from 1st quarter of 2021 show the combined volume of electronic fund transfers through pesonet and instapay hit 107 million transactions with total value of p1. 5 trillion. volume grew by 365 % and value by 171 % compared to the same period in 2020. this trend may be primarily driven by the desire to serve and retain their client - base, but it has also enabled msmes to expand their market. digital payment streams can also broaden msmes ’ access to finance. digital records of sales and payment transactions can be used in assessing the creditworthiness of a business which will unlock access to other welfare - enhancing financial services such as digital credit, insurance, and investment, among others. bsp ’ s priority initiatives for msmes the bsp has introduced a package of regulatory relief and incentive measures to ensure that banks would continue to lend to the msme sector amid the pandemic. the bsp is also aggressively undertaking various initiatives that will provide lasting benefits for msmes even after the pandemic. our credit risk database ( crd ) project in partnership with the government of japan aims to improve access to finance for smes by lessening banks ’ dependence on collateral during credit evaluation. instead

to the capital buffers that they retain on top of the existing minimum. if banks target buffers above the regulatory minimum, which is an endogenous market outcome, they may need to raise even larger amounts of equity than what can be expected by just looking at the current package. we know from empirical studies that weaker capitalized banks typically exhibit weak loan growth compared to other better - capitalized banks. we also know that banks may find it less costly to adjust loan volumes and loan pricing than capital, as frictions in the market for bank capital make the latter option more expensive. while the crisis has clearly had global ramifications, its impact on financial systems has not been uniform across the world. financial structures differ greatly between countries and there needs to be scope for different countries to tailor solutions to their circumstances and structures, while, at the same time, doing so within a globally agreed framework. for instance, our experience in france is that our banks ’ universal model has weathered the storm relatively well. it would be a major paradox to put in place rules that would challenge such models. finally, any regulatory framework needs to manage regulatory arbitrage and keep up with innovation and other forms of structural changes. for this, a necessary but not sufficient condition is that standards be comprehensive in coverage and consistent across jurisdictions. i am not sure, for instance, that the leverage ratio, if it were to be implemented as a compulsory instrument, would meet this double test. given existing accounting divergences, consistency will be very difficult to achieve. furthermore, it is likely to encourage migration of credit activities towards other – less regulated – parts of the financial system. convergence between accounting standards is a precondition for a consistent implementation of some of the prudential reforms discussed by the basel committee. it is also essential that new prudential standards for banks become truly universal. we should not underestimate the difficulties on the road to accounting and regulatory convergence. how can we reduce the procyclicality of financial systems? our accounting and prudential regimes have increased procyclicality in recent years. this is detrimental to a stable flow of credit to the economy. in a mark - to - market environment, asset price increases quickly translate into a larger capital base of financial institutions, which, in turn, trigger additional demand for assets and a further increase in their prices. a spiral is launched. actually this is a kind of “ inverted demand curve ” where demand increases with prices and vice