Bankers Institute of the Philippines

TAKING STOCK, HARNESSING STRENGTHS, FORGING AHEAD

The officers and members of the Bankers Institute of the Philippines, fellow bankers, special guests, good afternoon.

When I received my invitation to induct the new officers of the Bankers Institute of the Philippine I was struck by its chosen theme: “BAIPHIL Beyond 70: Taking Stock, Harnessing Strengths, Forging Ahead.” I realized that we are on same track, on an institutional level.

Indeed, having reached the grand age of 70 and passing on the leadership of BAIPHIL from immediate past President Noel Barcena to brand new President Agnes Brillante-Santos, it is the proper thing for you to do: to take stock, harness strengths and forge ahead.
On the part of the Bangko Sentral ng Pilipinas, challenging times such as what we are going through now… call precisely for taking stock and harnessing our strengths as we forge ahead. This afternoon, I invite you to join me in this exercise of taking stock of where we stand, our strengths, and the way to move forward.

Let me start with where we stand. First and foremost: our banking system remains sound and stable… even as the global financial environment remains in turmoil.

One thing is clear: our determined implementation of the banking system reform agenda is paying off. Among others, the performance indicators of the banking system indicate effective financial intermediation and better risk management in our banking industry.

For instance, the banking industry has been posting double-digit growth in its loan portfolio since the start of the year, supporting economic activities and spurring growth in the country. In particular, bank lending of commercial banks increased 18.8% last May from a 14.2% growth in April.

At the same time, non-performing loans (NPL) ratio of universal and commercial banks improved further to 2.8 percent in May 2011, matching the lowest level before the 1997 Asian financial crisis.

Solvency is another strong point. As of December 2010, the capital adequacy ratio of the banking sector on a consolidated basis was 16.97 percent, comfortably above the Bangko Sentral’s minimum requirement of 10 percent and double the Basel Accord’s global standard ratio of 8 percent.

Relative to this, the Bangko Sentral has started to implement the Internal Capital Adequacy Assessment Process and Supervisory Review Process or Pillar 2 of the Basel II capital adequacy framework on universal and commercial banks…. consistent with the risk-based approach to supervision. This forward looking assessment of the capital adequacy of financial institutions… which considers risk profile and risk management systems…. will also be applied to foreign bank branches, as provided under BSP Circular No. 731 which was issued only last week – July 28.

Another positive for the banking sector is an enabling policy environment that gives banks the latitude and flexibility to adopt distinct strategies and business plans; broaden their menu of products and financial intermediation services; and better manage their risk exposures through the use of innovative products and complex financial instruments.

And there exists a strong partnership between Bangko Sentral and the industry players. We consult and cooperate on policy formulation as well as the implementation of laws and regulations… through various fora such as the Bank Supervision Policy Committee. This partnership helped us through trying times at the height of the global financial crisis… when the banking system experienced pockets of illiquidity.

In addition, our efforts to ensure adherence to the good governance principles of transparency, accountability and fairness in the banking sector continue to bear fruit.

Our banking system enjoys the trust and confidence of the public. Thus, while we had high profile bank closures, there were no bank runs that posed systemic risks. In fact, total deposits in the banking sector continues to hit record high levels. I read this behavior as the public’s recognition of fair and effective supervision of our banks by Bangko Sentral as well as the professionalism of our banks in general.

Equally important, the positive performance of our banking sector has been recognized by independent international institutions such as the credit rating agencies and the International Monetary Fund.

One accomplishment we should be particularly proud of is our continuing progress in promoting an inclusive financial system. Today, financial services are no longer limited to brick and mortar structures; in cooperation with telecommunication companies and network service providers, our banks broaden and deepen their reach to the unbanked and the underserved… at less cost. On the part of customers, new technology has made financial services more accessible and affordable.

Nevertheless, while there is enough flexibility to introduce innovative channels for the delivery of financial services, we should always ensure that there are enough safeguards to protect consumers and to keep the banking system sound and stable. We have, for instance, set prudential limits on certain exposures, established licensing requirements for certain banking activities, and increased the capital standards for banks to ensure that they maintain adequate buffer to cover their risk exposures.

By the way, I want to share two more good news: under the initiative of the Bank Marketing Association of the Philippines, 12 banks have come together to launch at 3 p.m. this afternoon at the BSP… a Kiddie Saving Campaign under our Banking on Your Future Program… where kids 12 years old and below can open savings accounts with initial deposits of P100… and below! The banks include some of our biggest universal and commercial banks plus three thrift banks. Their objective is to develop the habit of saving regularly among our schoolchildren. This is a parallel program to the teaching of lessons on saving and money management for public elementary pupils from Grade I to Grade VI under a joint program by the Bangko Sentral with the Department of Education.

Another good news is that a valuable reference material for the banking community will be available starting today. I am referring to the Bangko Sentral’s Annotated Book on the General Banking Law which will be launched at 4 p.m. this afternoon. Some of you may recall that last year, we launched the Annotated Book on the New Central Bank Act. For your information, both books were written by our own lawyers from the Office of the General Counsel whose collective expertise and experience in applying and interpreting banking laws are quite considerable. You can buy these books at the BSP.

Ladies and gentlemen. While we have much to celebrate in our banking sector, there is also a lot more that needs to be done…. to keep it dynamic, competitive, strong and stable. Let us continue to work together to make it happen.

As we pursue reforms in the midst of constant changes in the global financial landscape … and the challenge to pursue an inclusive financial system, …. we need to ensure that parallel programs are being implemented to avoid skills and knowledge gaps in the process. This is where BAIPHIL, a strength of the banking sector, can continue to provide vital and responsive support to our banks.

The challenge for BAIPHIL is to anticipate the needs of the banking community for training and information in light of developments around the globe and the needs of our local economy. The benefits that we will reap from these cut across time and business cycles.

Fellow bankers. To us at the Bangko Sentral, BAIPHIL has been a steadfast partner in moving the banking sector forward. We are happy therefore that BAIPHIL has also become Bangko Sentral’s active partner in teaching personal finance management to public school teachers and parents of schoolchildren. I understand that your level of commitment is such that resources are deployed – by way of snacks and prizes for top participants – …… and time generously shared…. as BAIPHIL officers led by Noel Barcena make a point to conduct and attend the lectures. We commend BAIPHIL for this.

Indeed, your level of excellence in meeting the training needs of the banking community ….and in helping others have better lives through financial education… are indelible legacies to our country and our people that BAIPHIL can be proud of.

I therefore wish BAIPHIL another 70 productive years. My congratulations to the past and present officers of BAIPHIL.

Mabuhay ang BAIPHIL! Mabuhay ang ating mahal na bansang Pilipinas!

Maraming salamat sa inyong lahat!