amando m tetangco, jr : empowering entrepreneurial filipinos thru microfinance speech by mr amando m tetangco, jr, governor of the central bank of the philippines ( bangko sentral ng pilipinas ), at the 2010 microentrepreneur of the year official launch, manila, 21 may 2010. * * * fellow advocates of the microfinance sector, good afternoon and congratulations! yes, ladies and gentlemen, we have many reasons to celebrate. first, this annual national search for outstanding filipino microentrepeneurs is on its 8th year. this speaks well of the commitment of those involved in this program. and so, let us give a big hand to citi philippines headed by sanjiv vohra ; the microfinance council of the philippines headed by mr. ruben de lara ; the bangko sentral ng pilipinas and my fellow central bankers ; and finally my hardworking co - members at the national selection committee which includes philippine daily inquirer chairperson marixi rufino - prieto ; sm investments vice chairperson tessie sy - coson ; former mbm antonino alindogan ; gma network ceo atty. felipe gozon ; go negosyo movement head and rfm corporation ceo joey concepcion ; chair of the leadership and strategy department of the ateneo de manila university and finance educator of the year dr. darwin yu ; and ayala corporation president fernando zobel de ayala. they are not only hardworking judges, they are also deeply engaged in supporting microentrepreneurs. palakpakan po natin silang lahat. another reason to celebrate is the continued growth and development of the microfinance sector in the philippines that has produced so many inspiring success stories. this has allowed us to sustain our annual search across the country. of course, this has made the work of the national selection committee members more difficult but ultimately more satisfying. let us therefore celebrate the transformative power of microfinance with a round of applause. i am also pleased to report that our efforts to promote microfinance and financial inclusion in our country have placed us in the international radar screen. in particular, survey results of the first annual global microfinance index and study – which was conducted by the economist intelligence unit of the economist group – measured the state of the regulatory framework, investment climate and institutional development. overall, the philippines ranked 3rd out of 55 countries, next to usual leaders

the capital shortfall, meaning the banks that came below the threshold of 5. 5 %. but this is a measure of the strictness of the exercise that it had such an impact on the balance sheet of the banks, and it ’ s a usual measure of the impact of such types of exercises. but it ’ s also a measure of the resilience of the system because, in spite of this drop of €263 billion, the vast majority of banks stayed above 5. 5 % and were able to support such a shock, and still have a capital ratio above the threshold. and let me underline that the threshold of 5. 5 % is well above the regulatory minimum, because as you know the regulatory minimum for common equity capital ratio will be in 2018 4. 5 %, so we have chosen a more demanding threshold. and most of the banks were able to resist such a drop in their capital and stay above the threshold. that ’ s proof of the resilience of the system, and at the same time proof of the strictness of the exercise. the distribution of this drop in the capital ratio you have in this slide. i ’ m not going to comment in detail. just to underline that 75 % of the participating banks experienced a 0 to 6 percentage points impact on common equity tier 1 under the adverse scenario. now the capital shortfall itself, as i said, comes both from the aqr and from the stress test. and the distribution you have in this slide, 11. 2 % from the stress test and 10. 7 % from the aqr. this is the capital shortfall from the stress test, 11. 2 %, but in the previous slide you have seen that the drop in capital coming from the stress test corresponded to €182 billion, which is a component of the €263 billion that i highlighted just now. so this is then the composition. and what i said about the front - loading that the banks have done since july last year is disaggregated in this table. and you see that the overall amount of measures of different kinds, they are not just capital measures, but are measures that strengthen the balance sheet and help to clean and prepare the balance sheet for the exercise. gross equity issuances since then amount to €60 billion. cocos or contingent capital issuance instruments that count as additional tier 1 and satisfy our conditions amounted to another €32 billion. internal capital generation, either by