, we are aware that our effectiveness as supervisor of banks is as important as the skills available in the banks to implement basel ii. hence, we have invested heavily in enhancing our supervisory capacity to keep up with the task. this we have done continuously and in line with international best practices. second, this new framework is relevant to our aim of promoting and maintaining monetary and financial stability in the country. as i have stated earlier, basel ii strengthens the link between regulatory capital and risk management as it will help us ensure that banks will maintain capital appropriate to their risk - taking activities. banks are also expected to properly assess and manage the risks. moreover, banks would be required to disclose pertinent information necessary to enable market mechanisms to complement the bsp ’ s supervisory oversight function. these intensified efforts to deepen and accelerate the evaluation, measurement, and disclosure of risks under basel ii are expected to strengthen the financial system. in this regard, risk management is consistent with the greater transparency and forward - looking nature of inflation targeting ( it ), which is the monetary policy framework that the bsp has been using since 2002. as in the it approach, a wider set of information and disclosure requirements are used to enhance risk management. there is also more emphasis on anticipation of risks over a longer horizon and on greater sensitivity to market views. as a major channel for monetary policy, a stable financial system is a necessary condition for inflation targeting to work well in this country. let me now pose some questions that our experts may want to consider for discussion. 1. what are the key challenges encountered by commercial banks in their preparations? 2. what are the implications of the new supervisory framework on intermediation activities of banks and their financial stability, government borrowing, investment and capital flows, and the conduct of monetary policy? 3. will basel ii increase procyclicality as there are arguments that adopters may tighten credit standards in response to rising capital requirements in the event of a deterioration in credit conditions? will current developments such as reserve accumulation and rising liquidity in asia affect the adoption of basel ii in the country? 4. will the change in the supervisory framework lead to further restructuring of the banking system through mergers and consolidations? 5. how extensive will be its impact on bank lending for the country, and for developed and emerging economies? the implementation of basel ii underscores the bsp ’ s commitment to deep and far - reaching reforms to promote the stability and soundness of the banking system.

##tech to address fintech developments and their attendant risks. the rise of digitization also forces us to focus on the third pillar of central banking ( which admittedly, has not received as much attention in the past! ). with digitalization and technological disruption, the payment system is now seen as an essential tool for the effective implementation of monetary policy and as a critical infrastructure of a stable and inclusive financial system. these are all exciting prospects. allow me to talk about the bsp ’ s three mandates in this 1 / 5 bis central bankers'speeches context. evolution in the pursuit of price stability the bsp ’ s constant commitment to its primary mandate of price stability has led to managed and stable inflation in an environment of high economic growth. the philippines has achieved uninterrupted growth for the past 77 consecutive quarters despite domestic and global economic challenges. for six consecutive years ( in 2009 to 2014 ), as well as in 2017, inflation settled within the national government ’ s inflation target range. amid this resilience, the philippine economy is being tested by external headwinds emanating from the normalization of monetary policy by advanced economies, and the brewing trade tensions among key economies. these exert depreciation pressure on the peso even as the flexible exchange rate policy continues to be a stabilizing mechanism against unsustainable imbalances. the overall external position of the domestic economy remains resilient. the sustained resilience of foreign direct investments, overseas filipino ( of ) remittances, and business process outsourcing ( bpo ) receipts have provided additional buffers to the domestic economy. our external debt metrics have also improved as exhibited in the continued decline in the external debt to gdp ratio. these external transactions yielded positive results in terms of comfortable gross international reserves of us $ 76. 9 billion as of july 2018, covering 7. 4 months of imports of goods and payments of services and income. in the meantime, the peso continues to reflect day - to - day market conditions. over the last ten years, the peso has generally maintained its external price competitiveness against baskets of currencies of all trading partners and trading partners in advanced and developing economies. on the domestic front, the country ’ s inflation environment is confronted by a confluence of supply - side factors. this posed a challenge as monetary policy instruments more effectively address demand - side driven shocks. this was the case early this year when economic data suggested that an adjustment in