i believe it will be important to keep an open mind and avoid adhering to the decoupling philosophy too rigidly. in spite of the caveats i just the senior credit officer opinion survey on dealer financing terms is available on the federal reserve ’ s website. this concern is sometimes related to the “ tinbergen principle ” ( tinbergen ( 1952 ) ), which states that if the number of policy targets exceeds the number of instruments, then some targets may not be hit. however in a world with multiple instruments, the tinbergen principle does not imply anything about decoupling. that is, it does not imply that each instrument must be dedicated to a single target. bis central bankers ’ speeches described, i can imagine situations where it might make sense to enlist monetary policy tools in the pursuit of financial stability. let me offer three observations in support of this perspective. first, despite much recent progress, supervisory and regulatory tools remain imperfect in their ability to promptly address many sorts of financial stability concerns. if the underlying economic environment creates a strong incentive for financial institutions to, say, take on more credit risk in a reach for yield, it is unlikely that regulatory tools can completely contain this behavior. this, of course, is not to say that we should not try to do our best with these tools – we absolutely should. but we should also be realistic about their limitations. these limitations arise because of the inherent fallibility of the tools in a world of regulatory arbitrage ; because the scope of our regulatory authority does not extend equally to all parts of the financial system ; and because risk - taking naturally tends to be structured in a nontransparent way that can make it hard to recognize. in some cases, regulatory tools may also be difficult to adjust on a timely basis – if, for example, doing so requires extended interagency negotiation. second, while monetary policy may not be quite the right tool for the job, it has one important advantage relative to supervision and regulation – namely that it gets in all of the cracks. the one thing that a commercial bank, a broker - dealer, an offshore hedge fund, and a special purpose abcp vehicle have in common is that they all face the same set of market interest rates. to the extent that market rates exert an influence on risk appetite, or on the incentives to engage in maturity transformation, changes in rates may reach into corners of the market that supervision and regulation cannot. 23 third, in response to concerns

end - april 2020. at the same time, banks showed strong liquidity position by ably servicing cash withdrawals and providing needed financing to the economy. the operational risks from possible disruptions in the delivery of financial services was also a concern duly mitigated by the comprehensive business continuity management ( bcm ) system that banks are required to have. finally, the financial consumers ’ shift to digital payments amidst the need to maintain physical hygiene intensified global cyber - and money - laundering - related risks. nevertheless, the bsp, in coordination with other regulators such as the anti - money laundering council, is prepared to conduct investigations and information awareness campaigns to address cyber threats and financial crimes. the volatility, uncertainty, complexity and ambiguity ( voca ) in the economy and financial system has intensified due to this once - in - a - generation crisis. this has further muddled the task of forecasting and budgeting amongst businesses and policy makers. however, we are confident of the banking system ’ s ability to emerge out of this crisis stronger and more resilient. this optimism is shared by the japan credit rating agency ( jcra ), which gave the country ’ s first ever ‘ a ’ credit rating amid global ratings downgrades. among other factors, jcra underscored the strength of the banking system for its ‘ a - ’ rating and stable outlook. non - performing loans ( npl ) is edging up but remain manageable. the adverse impact of the pandemic on borrowers is expected to exert pressure to the current quality of bank loan portfolio. however, we expect the impact to be manageable due to the banking system ’ s sound risk management systems and financial strength built over decades of strategic reforms implemented by the bsp. another factor is the relatively low leverage of the biggest recipients of the banks ’ loans – the corporate borrowers. in fact, the moderate level of private sector debt in the country is one of the reasons why the philippines retained the s & p global ratings ’ banking industry country risk assessment ( bicra ) of 5 ( with rating of 10 as extremely high risk ) in 2020. this rating is among the best in south east asia. stressed cars meeting regulatory standards. our simulation exercises reinforce the banking system and the banking groups ’ capability to weather assumed stressed scenarios with a postshock car of the system and banking groups easily hurdling the 10 percent regulatory minimum. this was achieved as the banking system and banking groups entered the pan