nestor a espenilla, jr : thinking out of the bank speech by mr nestor a espenilla, jr, governor of bangko sentral ng pilipinas ( bsp, the central bank of the philippines ), at the cocktail hour : up close and personal with the bsp governor, manila, 26 october 2017. * * * wtcmm chairman guilly luchangco, wtcmm president pamela pascua and officers of wtcmm, partners from the private sector, fellow public servants, special guests, ladies and gentlemen, good afternoon. to get up close and personal – this underlines the terms of reference for this afternoon ’ s cocktail hour..... i think the natural tendency is for people not to disclose too much of themselves... candor requires courage. sharing about one ’ s identity, vision and values, necessitates confidence. i welcome this opportunity to share more about the bangko sentral ng pilipinas, who we are, our policy thrusts and initiatives. to be able to engage our stakeholders in the shared task of national development, we must make ourselves and our mandates more widely known and understood. getting past first impressions with philippine banknotes issued by the bsp and marked with our logo... with banks making reference to our authority... and with our name mentioned in media fairly often, it is easy for filipinos to know of the bangko sentral... but knowing the bsp is an entirely different thing. allow me to take us beyond acquaintance... apart from being a supervisor and regulator of banks and other financial institutions, and apart from being the sole issuer of our currency, most of what we do at the bsp seems esoteric to the general public. this is not surprising as the workings of economics, statistics, data analytics and the like, often do not enjoy public attention ( maybe, even public interest ). issuing and implementing policies to promote stability is the crucial work that the bsp does in the background. when one thinks of the bsp, one may have the initial impression that our functions are detached and removed from everyday life... the impression is that perhaps, the policies and regulations we churn out do not have that much impact on the ordinary citizen... i hope very much that we would get past this notion. as businessmen, investors and consumers, you may have seen and experienced that the philippines has, been enjoying strong economic growth

with financial stability. we are seen as one of the fastest growing and most resilient economies in the region and the world. the economy has experienced sustained uninterrupted expansion for the past 74 consecutive quarters — spanning 18 years! over the past five years, the domestic economy expanded by more than 6 percent annually, providing more opportunities across all segments of society. traditional central banking let me share an open secret : central banks worldwide ( and the bsp is no exception ) are traditionally conservative institutions and some would argue, boring. understandably so since stability is our main concern. thus, doing novel things may not be intuitively consistent with this goal. 1 / 5 bis central bankers'speeches in its invitation, the wtcmm asked me to share my plans and programs in the continuity of providing the country a strong monetary and financial system. this is really the traditional part of central banking, focusing on our core mandates of price and financial stability. the bsp adopted the inflation targeting framework in 2002 to achieve low and stable inflation. this was accomplished, providing credibility to what we do as a monetary authority. inflation continues to remain low and stable with well - anchored inflation expectations. headline inflation rose to 3. 4 percent year - on - year in september, making the resulting year - to - date average inflation rate of 3. 1 percent within the government ’ s target range of 3. 0 percent ± 1. 0 percentage point for 2017. we expect to sustain this through 2018 to 2019 based on our forecast. in 2016, we formally adopted the interest rate corridor ( irc ) system, which enhances the link between the bsp ’ s monetary policy stance and financial markets. the primary benefit of the adoption of an irc system in the philippines is the strengthening of monetary policy transmission by ensuring that money market interest rates are meaningfully influenced by the bsp ’ s policy rate. we continue to refine the implementation of the irc system to make it more marketfriendly. our financial sector also demonstrates stability and robust growth. domestic liquidity conditions remain ample to support lending. banks remain strong, supported by a stable capital base and satisfactory asset quality. the non - performing loan ratio ( npl ) is down to just 2. 0 percent as of end - august 2017. actually, it ’ s negative if we net out the generous allowance for loan losses. as of end - june 2017, capital adequacy ratio ( car ) of universal and commercial banks is very