the need for more market disclosures by banks on their risk management exposures and practices. this is fully consistent with basel ii pillar 3 recommendations, as well as the new international financial reporting standards or ifrs which we fully adopted since 2005. the rationale is that the market itself contains disciplinary mechanisms that can reinforce the efforts of supervisors by rewarding banks that manage risk effectively and penalizing those whose risk management is inept or imprudent through their patronage or non - patronage. basel ii and risk management as we move into implementation of basel ii, industry reaction is both revealing and interesting. on one hand, the commotion it is causing with banks doubling their efforts in improving their risk management systems to meet the requirements of the advanced approaches is a very positive development as far as the bsp is concerned. on the other hand, it is rather disappointing that it takes regulatory pressure for many banks to finally start investing in a sound risk management system. i understand that there are certain problems that now face banks as they aim to improve their own risk management systems.. a survey of emerging market central banks conducted by the bis reveals the three main difficulties faced not just by you, but by banks in emerging markets in general, in implementing more sophisticated risk assessment techniques. these are : 1. data problems. modern techniques of risk assessment in basle ii involve estimation of probabilities of default on the lenders ’ portfolio, as well as of loss - given - default. foreign banks get around by relying on data from their home country operations, but these data may not be applicable in the emerging markets they operate in. many emerging markets are however taking steps to improve data availability. for example, malaysia and thailand have respectively established centralized credit registry for households and corporations and a credit information bureau. 2. lack of suitable techniques for designing and calibrating models to evaluate alternative scenarios. 3. large human resources and infrastructure ( it and other ) costs of implementing advanced techniques for risk assessment. but improvements in risk management have inherent value to banks by avoiding major costs, including potentially catastrophic costs that can break a bank. thus they should be pursued with or without regulatory requirements. those of you who are sports fans can relate to this. as you know, success in many sports today relies on a solid defense that is always there whether the breaks are with you or not. sophisticated risk management systems should be put in place because the bank sees the need to, and not just to impress, or perhaps intimidate the supervisors.

pressures in the foreign exchange spot market, and to provide a hedging facility for those with foreign currency - denominated borrowings, the bsp reactivated the currency rate risk protection program or crpp in september 2018. yes, indeed we had some challenges. but i believe we rose decisively to meet all of them. the philippine economy maintains its record of uninterrupted gdp growth for 80 consecutive quarters. this covers an impressive span of 20 years! 1 / 4 bis central bankers'speeches we continue to be one of the fastest growing economies in the region! the resiliency of our economy can be attributed to more than two decades of sound and strategic reforms. these reforms have created buffers for the nation to withstand shocks and benefit from a more flexible policy space. the consistently sound and stable condition of the philippine banking system – a product not only of prudent regulation and risk - based supervision, but of earnest cooperation from the sector itself – is a key anchor of our growing economy. assets of the philippine banking system continued to expand to p16. 4 trillion by end - november 2018, attributed mainly to deposit growth. most of these deposits were deployed to lending for productive activities. loan quality remains satisfactory as banks continue to adhere to sound credit underwriting standards. meanwhile, capitalization continues to build up, with capital ratios remaining well above national and international thresholds. overall, amidst the challenges of 2018, the philippine economy has remained strong and robust. it continues to live - out its growth narrative. congratulations everyone. but we shouldn ’ t also overlook the fact that 2018 was also an exceptional year in pursuit of bold financial sector reforms. we introduced several refinements in the interest rate corridor ( irc ) system which provided bsp with greater operational flexibility. with the resulting firm anchoring of market rates to the irc, we were able to reduce reserve requirements ratio ( rrr ) by a total of 200 basis points as operational adjustments. this keeps us on track of the medium - term goal of a phased and gradual approach in reducing rrr to single - digit level. we also continued to liberalize foreign exchange rules and pursued improvements in the governance framework of the fx trading market. we likewise implemented measures to further develop the domestic capital market. these include enhancement of rules to facilitate bank bond issuance, paving the way for more private bond issuances. the bsp also issued enhanced guidelines on marking - to - market of financial instruments in response to the adoption