action framework which provides a time bound setting to deal with problem banks. • adopted measures to improve access of smes to financing through lower reserve requirements and relaxed - but still prudent - regulations on bank branching, risk weights, single borrower ’ s limit, connected lending and documentation. indeed, the continuing partnership between the bsp and the banking sector has produced very positive results in 2006. economic and monetary policy outlook moving forward, let me share with you our views on the likely economic prospects for 2007. with resilient personal consumption, strong exports performance and robust services and industry output, gdp growth is expected to rise to 5. 7 - 6. 5 percent for 2007. if our fiscal position continues to improve, we can look forward to stronger, more sustained long - term growth. inflation is seen to continue to slow down in 2007, with the government target of 4 - 5 percent likely to be achieved, in the absence of new shocks. nevertheless, there are certain risks to inflation that need to be carefully monitored and assessed, including oil prices, possible impact of el nino on agricultural output, wage adjustments, and possible liquidity expansion. the bsp will continue to keep a vigilant eye on these risks so that it could move pre - emptively against threats to price stability. on the external front, dollar inflows from ofw remittances and foreign investments are expected to remain strong. this should continue to boost our external payments position and enable us to further build up our international reserves. these conditions, in turn, underpin our expectations of a strong peso in 2007. in fact, we are now our reviewing foreign exchange regulations, with further liberalization as our goal. going forward, we will continue to support various legislative initiatives to foster the development of our financial markets, including the creation of a centralized credit information bureau system to improve the quality of financial information available to investors, enhance private sector access to credit, and minimize exposure to risks of financial intermediaries. we are hopeful that the bill will be approved by the bicameral committee and signed into law by the president as soon as possible. the bsp will also continue to support additional legislative initiatives to hasten the development of the philippine capital market, including the amendments to the bsp charter, corporate recovery act, revised company investment act, and the personal equity retirement act. in the banking sector, we expect further expansion of bank resources, improvement in banks asset quality through npl disposal,

really de novo uk banks, because i think these figures speak for themselves. we have, however, said and done less on ease of exit. by “ exit ” here we mean the point at which a firm becomes unviable and can no longer sustainably meet obligations to customers using its own resources. while this often ultimately ends in winding - up proceedings, outside of fast failures there is much that can be done beforehand to “ ease ” their passing1. a reliably safe exit process is a vital corollary of ease of entry, as it allows us to be more accommodating to new entrants. the exception to this, and it is a very important one, is on the form of exit we call “ resolution ” – led by my colleagues dave ramsden and sasha mills and their hard - working team in the resolution directorate, with extensive support from pra supervisors. on this type of exit we have done and said a lot, not all of it palatable to everyone in the audience but all of it designed to reduce the risk of the cost of bank failures falling onto the taxpayer rather than investors. resolution – which in the case of smaller banks entails a bank resolution process – provides a backstop for the financial system for failed firms, with resolution reserved for larger firms because of the greater scope their failure has to cause collateral damage. quietly, we have done a lot of work on forms of exit that see banks leaving the market before the backstop is needed. in fact, the pra has over the past 8 years facilitated the orderly and solvent exits of 15 banks and 45 insurers. that these firms ( as well as many more credit unions ) exiting has gone largely under the radar and without impacting financial stability is a sign of success, and of a healthy functioning market. almost all of these orderly exits have followed a wind - down or run - off process, which our supervision teams have worked intensively on with firms in order to execute them successfully. but despite the benefits of a safe and orderly exit process for firms before they get to the point of resolution or insolvency, this strategy has not been set out as a prominent feature of our approach for firms. for instance, the team running our recent check - up of the pra found that supervisors of smaller mid - sized firms generally spend a small fraction ( 3 % ) of their time on orderly exit planning in normal times. perhaps partly as a result of this, the business