there have been reported layoffs, the numbers are quite small compared to the total number of overseas filipinos. we also expect further growth for the business process outsourcing sector in 2009 as recession in the global economy is seen to encourage outsourcing to streamline costs. this scenario should challenge our rural banks to work better on growing your business and clientele so that you can capture a bigger share of our expanding economy, particularly in the resilient countryside. how, then, should rural banks move forward? in our view, it is critical for rural banks not to waver in their resolve to pursue reforms that would ensure strength and stability of your banks. in this context, your banks ’ risk infrastructure is a key component that will allow you to identify and act on risks that may arise ; credit risks and liquidity risks are particularly important. in the case of risks, a proactive approach is preferable over remedial management. for instance, credit risk can be mitigated by generating high quality information and acting prudently based on this information. on the other hand, it is important in managing liquidity risk to strike the appropriate balance between actively deploying funds through loans and investments and in retaining enough of a defensive position so that liquidity is available when the need arises. again, this poses its own challenges for rural banks because of the narrower exposures from focused lending to a local community. another important aspect is your commitment to maintain strong capital positions not simply for compliance but for prudent control of leverage. management should ensure that your banks have sufficient buffer whenever risks turn into losses, through careful allocation of scarce capital to alternative exposures. while we will not dictate your allocation, your adherence to maintain capital adequacy above our regulatory floor rate of 10 % reflects commitment toward prudential control and financial governance. on our part, we at the bangko sentral will continue with banking reforms that will encourage improvement of capital positions and broaden the avenues for better risk management. we will move forward with the implementation of consolidated and risk - based supervision ; the enhancement of corporate governance and disclosure standards ; and fostering transparency in financial reporting. if you recall, these initiatives which we have vigorously implemented in recent years are instrumental in instilling order and depth in the banking system ahead of the onset of the global financial crisis. the bangko sentral will also maintain its policy approach of enabling banks, particularly rural banks, to increase the scale and scope of

amando m tetangco, jr : banking on governance for growth and stability speech by mr amando m tetangco, jr, governor of the central bank of the philippines ( bangko sentral ng pilipinas ), at the rural bankers association of the philippines ( rbap ) 2009 national annual convention, manila, 15 may 2009. * * * ladies and gentlemen of the rural bankers association of the philippines led by mr. tomas gomez iv, outgoing president, and mr. omar andaya, incoming president of rbap, supporters and advocates of our rural banking sector, colleagues from the bangko sentral, special guests, members of media, ladies and gentlemen, good morning. we at the bangko sentral ng pilipinas join you in celebrating 56 years of rural banking in the philippines. this is 56 years of partnership with local communities in invigorating countryside development – a fruitful partnership that has seen our rural communities grow and develop alongside rural banks. indeed, key indicators for the rural banking sector show steady growth even in the midst of the global financial crisis and the closure of a number of rural banks engaged in unsafe and unsound banking practices. among others, the operating network of rural banks continues to increase. as of end december 2008, the network of rural and cooperative rural banks, consisting of head offices and branches, was at 2, 148, higher than 2, 133 in 2007. while there was a net decline in the number of head offices from 727 to 703 as a result of closures and mergers, this was more than offset by the increase in the number of branches. the net effect is a larger network capable of delivering banking services directly to a wider market. in addition, rural banks are exhibiting greater innovation and dynamism by seizing opportunities presented by technology. the industry enhanced its banking services delivery with the installation of more automated teller machines ( atms ) : from only 83 in 2007 to 113 as of end december 2008. a number of rural banks have also ventured into electronic banking to beef up delivery of financial services : the number of rural banks offering e - banking services such as cash cards and mobile banking have increased to 47 in 2008, from only 5 banks in 2005. it is important to note that the increasingly broader and deeper reach of rural banks, comes at a time when bank deposits in all but one of the regions were on the rise. consolidated deposits of 6 million savers with rural banks as of end december 2008 reached more