amando m tetangco, jr : pushing the island ’ s boundaries speech by mr amando m tetangco, jr, governor of bangko sentral ng pilipinas ( bsp, the central bank of the philippines ), at the institute of corporate directors ( icd ) program for islands of good governance, manila, 20 october 2015. * * * an island of good governance. when i think of an island, isolation first comes to mind. i imagine the island ’ s exposure and triumph over harsh elements. after all, physical islands are themselves products of struggle. they break away from origins, and establish new foundations. but an island can also be tranquil. a source of verdant prosperity. an island ’ s account is not unlike the story of the bangko sentral. when the bsp was established by law in 1993, it took over the then central bank. a redefinition was necessitated as the worldwide trend was for central banks to be independent and focused on price stability. as the country ’ s sole and independent monetary authority, the bsp is similar to an island indeed. it has weathered violent waters and storms. but it remains resilient and stable. and it has, as i will later on narrate, made a positive impact on its environs. then there is good governance. governance is a relational concept. to be good, and even to be better, is the objective. implied is a positive influential authority over the island ’ s inhabitants, over resources, over its supervised and regulated entities, and even beyond that. while the concept of “ good governance ” is a noun, its essence is dynamic. there is action toward a goal. the vision is a high quality of life for all filipinos. all 5, 321 “ inhabitants, ” if you would, officers and staff of “ island bsp ” from our manila office, security plant in quezon city, three regional offices, and our nineteen branches nationwide, are committed and united in this objective. we are guided by our strategy that has four themes : good governance, operational excellence, engaged stakeholders and organizational readiness. we also know that an island cannot be insular. it must cooperate and collaborate. the bsp deeply values its stakeholders and partners, domestic and international. this july, the bsp convened 13 government agencies to launch the national strategy for financial inclusion, with the goal of providing a platform for coordinating work to build an inclusive financial system. in a

the financial stability committee ( fsc ) was created in september 2010. the fsc is tasked to determine the appropriate market vision and work plan to adequately mitigate the build - up of systemic risks in the financial system. 3. the bsp believes in a holistic and well - coordinated approach in pursuing its financial inclusion agenda. toward this end, a high - level inclusive finance steering committee was constituted on 27 february 2012. the committee provides direction and oversight in all bsp policies and programs related to financial inclusion. 4. bsp ’ s membership in external committees includes the fsf and fscc, both of which broadly endeavor to strengthen and protect the country ’ s financial sector. c. reports 1. the inflation report is published quarterly as part of the bsp ’ s efforts to improve the transparency of monetary policy under inflation targeting and to convey to the public the thinking and analysis behind the monetary board ’ s decisions on monetary policy. 2. the quarterly report on economic and financial developments ( letter to the president ) outlines the major developments in the real, monetary and fiscal sectors of the philippine economy. 3. the financial stability report is published two times a year. it provides a comprehensive assessment of the robustness as well as vulnerabilities of the domestic financial system against emerging economic and financial developments both in the global and domestic environment. fact 2 : we are reform - minded and have a strong reform agenda in place. bis central bankers ’ speeches we are geared up for the basel 3 capital framework. this slide shows a comparison of the minimum requirements under our old basel 2 framework, the basel 3 framework of the bis and our own requirements in 2014. you will see that our minimum car has not changed. it is still 10 pct. what has changed, however, is the composition of qualifying capital. from a requirement of minimum tier 1 of 5 pct under basel 2, we will now be requiring at least 6 pct of common equity tier 1 ( cet1 ). the minimum tier 1 shall now be 7. 5 pct. it's not on the slide, but we will also be requiring a 2. 5 pct capital conservation buffer, all of which must be cet1. in other words, ladies and gentlemen, what has changed is the composition of capital to improve its loss absorbing capacity. i have been asked why we appear to be in a hurry to implement basel 3. it ’ s true we are ahead of the basel timeframe of 2019