this is creating market uncertainty, because in addition to contraction in global trade, a significant slowdown in china could also put downward pressure on global commodity prices. furthermore, the markets are carefully watching the chinese authorities ’ next moves to liberalize their markets. you may recall the stock market rout in china in august last year. that was precipitated by the surprise rmb devaluation. that led to a sell - off in equities across the globe. analysts say that to avoid a recurrence of such adverse reactions, markets need to see bis central bankers ’ speeches more cohesiveness in the policy measures from chinese authorities, as well as clarity in their communication. in the us, the fed, in december 2015, determined that the us labor market conditions and inflation outlook already warranted “ lift off ”. based on the assessment of the fomc members then, the fed was projected to raise its target rate by 100 basis points in 2016. but more recent statements of some fed governors now reveal less conviction in terms of the speed and magnitude of normalization of its policy. even fed chair yellen indicated in her latest testimony to the us congress that foreign economic developments could pose “ risks to economic growth. ” some analysts have taken these recent statements to mean that the fed may delay its next tightening moves. this uncertainty is heightening market volatility – yet again! turning to oil – oil price is now at about $ 30 per barrel ( pbl ). in mid - 2014, it was about $ 108 pbl. while the rate of decline has decelerated, the price is now at levels that have triggered major oil producers to “ come to the table ” to discuss the possibility of “ freezing ” production to specific output levels. global oil supply has overtaken demand since 2014. oil importers such as the philippines benefit from low oil prices. low oil prices feed positively towards lower inflation and encourages domestic economic activity. but low prices are doubleedged in that significantly low oil prices could lead to oil - exporters cutting back on capital expenditures. this in turn may trigger a decline in global trade and growth. the uneven global growth prospects, the differences in the policy actions across the globe, and the uncertainty in oil price movements are triggering global portfolio rebalancing. as market players flesh out their interpretation of these developments, volatility in financial markets is heightened. according to the institute of international finance ( iif ), emerging market economies ( em

raise rates, markets kept on “ pushing the envelope, ” so to speak, in terms of maximizing the benefits of low interest rates. through a series of tightening measures, we communicated to the market then that players should begin to take stock of how they were assessing and pricing risk. in a way, the bsp was reminding banks ( and the general public ) that interest rates would not remain low forever, and that there is need to re - think business models and investment strategies. we also ensured that our tightening measures were consistent with the inflation outlook at the time. because our actions were early enough, our markets were well - positioned when the fed finally raised its target rate in december 2015. we are not only forward - looking ; we are also calibrated in our actions and mindful of the idiosyncrasies of our domestic economy. let me illustrate using our approach to banking reform. in the aftermath of the gfc, the global financial market reform agenda was thick and heavy - handed, primarily because there was much fear of a recurrence of crisis from slack regulation. the philippine banking system was not as affected by the gfc. in part, because our bankers are inherently conservative. therefore the bsp adopted the global reforms in a calibrated manner and only as appropriate to our domestic conditions. we were an early adopter of the capital requirements under basel 3, and we are now phasing in the rest of the components of basel 3. in addition to adopting global reforms that are suited to our particular requirements in a timely manner, we also put out regulations and guidelines that are intended to raise bank governance standards, strengthen credit, operational, it risk management and internal control frameworks, and improve market conduct. our approach to regulatory reform is anchored on financial stability. this is an important lesson we learned from the gfc. most policy makers have now come to realize that having strong individual banks, while that is necessary, is not sufficient. policy makers need to consider the strength and soundness of the system as a whole. our regulations benefit from consultation with the banking industry and are evidence - based. we meet with industry associations and groups – 15 in all – through the bsp supervisory policy committee. putting all these together, you can see that our approach to regulatory reform and adoption is comprehensive and strategic. our goal is not only to grow strong domestic banks but also banks that can compete in the global arena, particularly when asean integration comes to full swing. bs