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Gov’t ready to intervene to ensure financial market health

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By Lee C. Chipongian

Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said the government is ready to secure financial market stability from “brewing” risks through any means including intervention.

Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno.(Bloomberg)

Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno.(Bloomberg)

This was Diokno’s statement after the BSP and other government economic agencies met recently for the regular Financial Stability Coordination Council (FSCC).

In analyzing the impact to the Philippines of a possible global growth slowdown, Diokno, who is also FSCC chair, said they are ready to “guard the financial system against brewing systemic risks that can have negative consequences on the real economy and on the public”. For now, the FSCC views global financial system as stable or on “solid footing.”

Diokno said a healthy financial system “allows consumers to maximize the benefits of finance while avoiding any costs from possible disruptions.” This is where FSCC comes in by ensuring timely and appropriate macroprudential policies to protect the domestic financial market.

So far, the FSCC after reviewing the latest data which is the second quarter numbers, has assessed that the financial market here is still relatively safe in terms of risks to credit, liquidity and investment. There is also available funds that the government would requre in financing its ambitious “Build, Build, Build” infrastructure program.

“We worked against the backdrop of an anticipated global growth moderation,” said Diokno. “We agreed on a number of possible interventions, from shorter term initiatives to our longer term goals. This leaves us with a roadmap geared towards sustaining market resiliency.”

The FSCC would have to make sure that there will be available resources to complete the infrastructure development plan, and provide diversified sources of funding. “The objective ultimately is to align the needs of a growing economy with a sound and responsive financial system.”

The FSCC, an inter-agency council with the BSP, the Department of Finance, the Insurance Commission, the Philippine Deposit Insurance Corporation, and the Securities and Exchange Commission, is tasked to identifying, monitoring, managing and mitigating systemic risks in the country’s financial system.

To strengthen and make more credible its monitoring and maintain a critical eye on financial markets, the BSP has crafted the Financial Stability Report (FSR) which it launched August of last year. Its maiden report has said that while there was a higher rate of market volatility, they find no evidence of potential crisis that would threaten the country’s financial system stability.

Th FSR also includes its view on the impact of globally rising interest rates and weaker currencies against the benchmark US dollar as this relates to the repayment, refinancing and repricing of debt.

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