benjamin e diokno : philippine banking system - forging path towards sustainable economic recovery speech by mr benjamin e diokno, governor of bangko sentral ng pilipinas ( bsp, the central bank of the philippines ), at ibc business webinar series, 29 september 2020. * * * distinguished officers and members of the ibc led by mr. juan jose zamora iii, esteemed guests and partners in the financial services industry, ladies and gentlemen, ma - ayong hapon sa indo nga tanan! it is always a pleasure to engage with our stakeholders and partners, and discuss our shared goals and development aspirations for our country. this coronavirus crisis is unlike any of the previous crises that we have experienced. it did not originate from financial sector vulnerabilities like the 1980 debt crisis, the 1997 asian financial crisis, or the 2007 – 2008 global financial crisis. but the effects are strongly felt nonetheless. my presentation this afternoon will focus on key developments and updates on how the banking system is faring during the pandemic, the crucial role of banks as catalysts of economic recovery, and the bsp ’ s strategies and relief measures to cushion the adverse effects of covid - 19 pandemic on the economy particularly on individuals and businesses. let me stress this : the philippine economy is fundamentally strong. this is the result of over two decades of implementation of critical structural reforms. we have a sound fiscal position, with manageable fiscal deficit and low levels of government indebtedness. we have low interest rates, manageable inflation, healthy external accounts — with record - high gross international reserves ( gir ) and stable peso. in a sea of downgrades, rating agencies maintain the country ’ s investment grade status. s & p, moody ’ s and fitch affirmed our investment grade sovereign rating japan credit rating agency upgrade the philippines to an ‘ a ’ status, the same with r & i which upgraded the philippines to bbb + also, the economist ranks the philippines 6th among 66 emerging market economies, and the first in asia. the philippine banking system is sound. banks are well - capitalized with high capital adequacy ratio above the bsp minimum regulatory requirement and the bis international standard. asset quality remained manageable during the pandemic as bsp survey revealed a low npl ratio of 2. 4 percent as of end - july 2020 and projection of 4. 6 percent by end - december 2020.

##s. lastly, is support for continued financial services delivery. these include relaxed reporting requirements, temporary suspension in the imposition of monetary penalties, use of legal reserves for liquidity needs, accounting relief measures, and the deferred adoption of the safr framework. based on the latest bsp data, loans to msmes amounted to p106. 0 billion, in august 20, 2020 up from php 9. 3 billion in april 30, 2020, or by a whopping 1, 039 percent. meanwhile, loans to enterprises reached p13. 6 billion, growing by 17 times since we started monitoring from the effectivity of bsp memorandum no. m - 2020 – 046 on 29 may 2020. to address concerns about loan defaults, credit and debt collection, we have extended for another 30 days grace period for loan payments the 30 - day grace period under bayanihan 1. under bayanihan 2, we will implement the mandatory one - time, non - extendable 60 - day grace period for loans on current status. apart from this, the bsp has extended regulatory relief to banks so they can extend relief to their clients in the form of more flexible and favorable lending terms, or restructuring / rediscounting of loan accounts, staggered booking of allowance for credit losses and moratorium on the imposition of interest charges, fees and penalties on loans during the grace period. lastly, on the impact of covid - 19 on overseas filipino remittances. overseas filipino remittances in 2019 was us $ 30. 1 billion. original projection before coronavirus crisis is that of remittances will increase by 5 percent. revised forecast as of june 2020, post covid - 19, was that overseas filipino remittances will fall by 5 percent. 3 / 4 bis central bankers'speeches but year to date, or from january to july, of remittances fell by just 2. 4 percent ; rose by 7. 7 percent and 7. 8 percent in june and july after declines in march, april and may. this is welcome news. this development is much better than the gloomy forecasts of some international agencies that overseas filipino remittances will plunge by more than 20 percent. filipinos abroad are truly altruistic. that said, we have to learn to live with the virus. we can ’ t – and we shouldn ’ t – wait for the vaccine before we act. all of us have an