nestor a espenilla, jr : good governance in the pursuit of mandates speech by mr nestor a espenilla, jr, governor of bangko sentral ng pilipinas ( bsp, the central bank of the philippines ), at the institute of corporate directors 2018 mid - year economic briefing fellows ’ breakfast roundtable, manila, 17 july 2018. * * * icd chairman francis estrada, chief executive officer dr. alfredo pascual, business, industry and government leaders, vanguards of good governance, ladies and gentlemen, good morning. i thank the institute of corporate directors ( icd ) for this opportunity to share the corporate governance initiatives championed by the bsp for itself as an institution, in delivering on our price stability mandate, in setting an example and in giving guidelines to those under our supervision. a plethora of literature on central banking emphasizes the importance of credibility in shaping monetary policy and in guiding the market. credibility too is important for effective regulation. it is notable that even in everyday personal relationships, credibility is built on established competence and character. on consistency. on integrity. on good self governance. at the bsp, we believe that good governance should flow from the top. by this, i am not only espousing decisive leadership. rather i emphasize that to elicit good governance, we must ourselves practice good governance. for it is only then that we will have the credibility and moral ascendancy to elicit the public ’ s and the market ’ s trust and guide expectations, and it is only then that we could effectively require good governance from our supervised entities. good governance in the bsp as early as 2009, the bsp adopted a principles - based governance framework. in 2015, the bsp was recognized as an island of good governance by the icd and as of 2017 [ vetted by the development academy of the philippines ( dap ) ], two out of our five governance principles : accountability and transparency and strategic direction were assessed at “ high integration. ” three of our other principles — integrity, ownership and voice ; and responsiveness — were rated at “ sustainable ”. these principles are set forth in our 3 - year governance roadmap for 2017 to 2019 and are integrated into the bsp ’ s decision - making systems, processes, and work ethic so that we can give the best possible service to our country and to our fellow filipinos. in the bsp, we affirm that good governance is not just about compliance

foreign currency outflows. this is a reversal from previous bop surpluses accumulated from the large inflows due to quantitative easing since the global financial crisis. with the normalization of us monetary policy and rising global interest rates, we see significant corrections in capital flows that are affecting our bop and exchange rate. this is compounded by uncertainties posed by the trade war and geopolitical risks. nevertheless, we view these as short - term macro - stability challenges. over the medium - term, our sound fundamentals should serve us in good stead. first, strong imports are driven by capital goods, raw materials, and intermediate products to support infrastructure development that can raise potential output. second, foreign investments by filipino corporates and residents are increasing. blue - chip companies continue to search for profitable ventures abroad. third, filipinos are prepaying their foreign loans reflecting tempered risk appetite for foreign exchange exposures. these outflows indicate sound risk management. further, the balance of payments is reliably supported by strong structural foreign exchange inflows, specifically revenues from the it - bpo industry and overseas filipino remittances, as well as rising foreign direct investments. finally, gross international reserves continue to provide ample external liquidity buffer. the endjune 2018 gir of usd 77. 7 billion is equivalent to 7. 5 months ’ worth of import of goods, and payments of services and primary income. 2 / 5 bis central bankers'speeches good governance and credibility in our commitment to price stability amidst headwinds brought about by domestic and global factors, we remain strongly committed to our primary mandate of price stability. average headline inflation as of june 2018 is above target at 4. 3 percent. while we expect this to return to within target band in 2019, we nevertheless treat the inflation outlook as a concern given elevated inflation expectations and increasing risks of second - round effects from ongoing price pressures. in achieving price stability — clear and open communication — the announcement of an explicit inflation target is central... to this, credibility is the bedrock. it reflects not only a commitment to the goal, but also to ownership of the inflation target. since 2002, we have been committed to the inflation targeting framework. the framework demands that monetary policy decisions be forward - looking and data - dependent. as an inflation - targeting central bank, we allow foreign exchange flexibility so that we can conduct independent monetary policy primarily focused on assessment of domestic conditions, and is thus not based on actions of the