amando m tetangco, jr : financial stability through collaboration and understanding speech by mr amando m tetangco, jr, governor of the central bank of the philippines ( bangko sentral ng pilipinas ), at the insurance congress of developing countries ( icdc ) 2009, makati city, 25 march 2009. * * * atty. eduardo malinis, insurance commissioner and chairman of the organizing committee of the insurance congress of developing countries 2009, other distinguished speakers, distinguished delegates to this insurance congress, ladies and gentlemen, good morning. to our visiting delegates, welcome to manila! welcome to the philippines! i hope you ’ ve had or you will have the chance to partake of the many options to help further “ stimulate ” our domestic economy. i am sure all of us in this room have heard about the different financial stability and fiscal stimulus packages, being pursued by economies across the globe, to help stem the impact of the current global financial and economic crisis. i am certain the organizers of icdc manila 2009 have also put together their “ own ” version of a post - meeting stimulus package to complement the many interesting conference breakout sessions. for my part, i ’ d like to encourage all of you to participate as actively in that endeavor as you would in the different sessions in the next three days. let me begin my remarks this morning by thanking commissioner ed malinis and the congress organizers for inviting me to speak before you today. at first blush, the keynote message for a gathering of insurers to be delivered by the governor of a central bank that supervises only the banking sector, may be a bit peculiar. but if one seriously looks at the situation, it is indeed quite reflective of the theme of the congress, which is financial stability through collaboration and understanding. ladies and gentlemen, at no other time than now has the need for promoting financial stability been more imperative. as we are all keenly aware, the current financial turmoil has gone beyond the borders of the epicenter of the financial crisis – the us and the major economies – and has reached the shores of emerging markets. more importantly, the global financial turmoil has transcended the bounds of the financial realm and has crossed over to the real sector of most economies, including several represented here today. you will be pleased to know that my remarks this morning will be brief. i only have two messages that i wish to bring across, in light of our desire for financial stability. first is that, information

, what is incumbent among financial supervisors in order to facilitate and strengthen financial stability at this time, is to create and maintain an information sharing structure that will allow all to react swiftly and preemptively to changes in the operating environment. this will certainly help prevent the occurrence of a crisis of the magnitude and breadth we ’ re seeing today. ii. conduct of business supervision let me now move on to my second message which, i believe is an issue that is of particular interest to developing countries. one characteristic of developing countries is the relatively weaker financial sophistication of their consumers, which makes the customers quite vulnerable to financial scams, including relatively simple ones. i believe therefore that financial supervision in developing countries should not only focus on setting prudential standards, but also on strengthening conduct of business oversight of financial institutions ( i. e., supervision of the business practices, including dealings with customers ). the increased globalization of the financial industry presents a further complication as globalization improves the availability of and access to complex financial products across developing countries, without necessarily discriminating among levels of sophistication of the target markets. ensuring that financial institutions conduct their business in a proper and transparent manner should therefore be a primary concern for financial supervisors in developing countries. failure to ensure proper business conduct by financial institutions would have adverse implications on market confidence, which, in turn, could threaten the viability of the financial markets as source of funds that could support the productive capacity of the economy. this point could not be more apparent in the developments in the global financial markets we are witnessing right now. the fallout from the global financial crisis left many investors in financial products with substantial losses, and exposed some investment schemes as economically unsound if not totally fraudulent. the immediate impact was the weakening of confidence in financial markets, which played a key role in stoking the crisis. restoring market confidence through conduct of business supervision is therefore essential in order to restore the smooth functioning of financial markets. in the philippines, financial supervisors, independently and in collaboration with the financial sector forum, have already undertaken initiatives and issued rules to improve the conduct of business by financial institutions, especially those relating to complex products and services. the bsp, for instance, came out with circulars requiring banks and trust entities to take a more pro - active responsibility in marketing their derivative and trust products by conducting client suitability tests. under these rules, the bank / trustee shall perform a client profiling process under the general principles on client