benjamin e diokno : internal audit at the forefront of digital innovation welcome remarks by mr benjamin e diokno, governor of bangko sentral ng pilipinas ( bsp, the central bank of the philippines ), for the 6th asean central bank heads of internal audit network meeting “ internal audit at the forefront of digital innovation ”, 16 november 2021. * * * distinguished heads of internal audit ( ia ) and delegates of central banks in the asean region and the asian development bank, esteemed guest speakers, colleagues from the bangko sentral ng pilipinas, ladies and gentlemen, a pleasant day to all. on behalf of the monetary board and the bangko sentral ng pilipinas, i welcome you all to the 6th asean central bank heads of internal audit network meeting, which the bsp is hosting for the first time. it is unfortunate that we could not have hosted this meeting in manila where we can personally meet and welcome you, but i am sure that this virtual conference will be just as engaging and productive. behind the theme of this year ’ s meeting, which is aptly entitled “ internal audit at the forefront of digital innovation ”, is a similar novel concept : digital darwinism. it revolves around a simple rule : evolve or risk being irrelevant. in the last decade, we have witnessed how technology has dramatically advanced our day - to - day lives. we have also seen how the financial services industry has evolved to offer more customer - centric financial products, leveraging on emerging technologies, such as artificial intelligence, machine learning, and robotics, among others. the pandemic has further quickened this evolution. if anything, the pandemic has taught us that digitalization is no longer desirable to have, but a must - have. like other asean nations, the philippines aims to regain and surpass opportunities lost to the covid crisis. we want an economy that is stronger and more technologically advanced than ever before. one way of achieving this is through financial digitalization. going digital, building on it, tailoring it, securing it, and pushing it to new frontiers is imperative if central banks are to be successful in navigating the post - covid - 19 economy. in 2020, the bsp has launched the digital payments transformation roadmap where we aim to achieve two major goals by 2023 : first, that at least half of all financial transactions in the country are done digitally ; and second, at least 70 percent of filipino

##lity in the markets in general, and on your own p / l in particular. therefore, as we prepare for the eventual fed “ lift - off ”, you may wish to also consider making only gradual, non - chunky adjustments in your own portfolios. let me now spend just a few more minutes to speak about our current stance of monetary policy. the bsp has done a number of things over the past few months. we have raised reserve requirements, hiked the sda rate, the rrp rate and then, recently, both the sda and the rrp rates together. these we did in response to various factors to achieve the following results : 1. to rein in domestic liquidity growth. m3 growth is now down from above 30 percent to just above 18 percent in july this year. we expect m3 growth to continue on its deceleration path and reach more normal levels later this year. ; 2. to help manage the financial stability risks of the over - all low interest rate environment. while we have not seen broad - based asset mis - valuations, the bsp remains cognizant that keeping rates low for too long could result in mis - appreciation of risks in certain segments of the market, including the real estate sector and the stock market as markets search for yield. so far, coupled with changes in reportorial requirements and macroprudential measures, the monetary policy actions appear to have achieved some success in moderating the buildup of “ irrational exuberance ” in certain market segments. ; 3. to help steer inflation expectations. bis central bankers ’ speeches our most recent business expectations survey showed that the number of those who expected inflation to go up in the current and next quarters has increased. in addition, our survey of private sector economists shows inflation forecasts that are precariously close to the upper end of our target range. this is particularly true of forecasts for 2015, for which the ng target is lower at 2 – 4 percent. further, our own forecasts are also now higher. we now see 2014 inflation to average 4. 48 pct, up from previous 4. 33 pct, and 2015 inflation to average 3. 79 pct, up from previous 3. 72 pct. while most of the reasons cited for the heightened inflation expectations are due to supply side pressures, elevated expectations need to be addressed sooner rather than later. these could fuel second - round effects, which may be more difficult to arrest once they