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The Philippine Banking Sector: Stepping Up to the Challenge of Setting the Foundation for Sustained & Inclusive Growth

Date: 01.14.2011

Place: Fort San Antonio Abad, BSP Head Office Complex, Manila

Occasion: BSP's Annual Reception for the Banking Community,

Speaker: Governor Amando M. Tetangco, Jr.


Distinguished members of the executive, judicial and legislative branches of government, members of the diplomatic corps, the leaders of the Philippine banking community, multilateral agencies, the media, the private sector, NGOs, friends, good evening…. and welcome to the annual reception of the Monetary Board of the Bangko Sentral ng Pilipinas for the banking community.

As Governor of the Bangko Sentral and concurrent Chairman of the Monetary Board, I am one of your hosts. Your other hosts tonight are the six other members of the Monetary Board … who I will now invite to kindly join me here on stage:  Finance Secretary Cesar Purisima, MB Members Juanita Amatong,  Nelly Favis-Villafuerte, Alfredo Antonio, Ignacio Bunye and Peter Favila. 

Ladies and gentlemen.  We thank all of you for joining us tonight. This is an auspicious time… for our economy in general and our banking sector in particular.

  • First, our economy as measured by GDP grew 7.5% in the first nine months in 2010;
  • Second, inflation remained at low single digit levels, averaging 3.8 for the entire year in   2010 or at the low end of  the Government's target range of 3.5-5.5 percent
  • Third, the Bangko Sentral's policy rates have remained at record low levels since July 2009:  4 per cent for overnight borrowing and 6 per cent for overnight lending. As a result, most banks have also clipped their interest rates and kept the cost of money relatively lower.
  • Fourth, our strong external position provides a strong cushion against possible external shocks. Our gross international reserves (GIR) as of end-December 2010 is at an all-time high at $62.1 billion, higher by $17.9 billion compared to the $44.2 billion total in December 2009. This is partly due to our overseas Filipinos who continue to remit money to the Philippines in record levels. 
  • ifth, improvements in our economic performance and prospects have resulted in better credit assessment for our country. In November last year, the Philippines received a credit rating upgrade from S & P, the first in 13 years. And last week, Moody's Investors Service changed the outlook on the Government of the Philippines' Ba3 foreign and local-currency bond ratings to positive from stable; this is its second positive rating action in 18 months.
  • ixth, the Philippine peso has maintained its relative competitiveness with other currencies in the region as effective  management of foreign exchange inflows by the Bangko Sentral has allowed the peso to remain relatively stable.

Ladies and gentlemen, one of the reasons behind the sustained growth of our economy is our banking system which has remained sound, stable, and liquid… through the recent global  economic and financial crises.  

Lending, deposits, and profitability posted healthy growth rates in 2010; average capital adequacy ratio of over 15% remained comfortably above the BSP's 10% minimum requirement; and non-performing loans remained generally low at 3%.

In fact, initial assessments indicate that 2010 could be one of the best years for Philippine banks.

Equally important, we have made significant strides in our inclusive finance program. With the use of modern  technology, more and more people become part of the financial mainstream, gaining access from the different corners of the archipelago. And in parallel with the expansion of credit delivery channels, we have broadened and intensified our economic and financial education program to empower different sectors of our society. 

As of September 2010, for instance, outstanding microfinance loans of 200 banks to 933,000 borrowers stood at P6.53 billion…. or an average of nearly P7,000 per borrower. What is inspiring is that many of these micro borrowers have also become net savers with deposit accounts in banks.

These achievements have been recognized by international organizations and the markets.  For instance, the 2010 Global Microscope on Microfinance conducted by the Economist Intelligence Unit, ranked the Philippines as the best in terms of our policy and regulatory framework for microfinance  and number two overall for best performing country for microfinance, next only to Peru.  

But, our agenda does not… and should not… end here; there is so much more that we can… and should do.  You and I know that millions of Filipinos still live in poverty.

Among others, we should put in place an even more inclusive financial system by developing new programs to accommodate more of our entrepreneurial poor, the underbanked, and the unbanked. 

Banks can also broaden and make their corporate social responsibility programs more inclusive … on a sustained basis.  They can be related to education, livelihood, the arts, or cultural heritage preservation. The ideal is to empower and equip our people with skills that will make them productive and self-reliant for the long-term, within their respective communities.  

The Government's public-private partnership program under President Benigno S. Aquino III also offers new opportunities for our banking sector.  Not only will PPP projects generate employment, they will also fill in our country's need for infrastructure and catalysts that will spur long-term growth  

If the leaders of our banks represented here tonight respond to these challenges, then our banking community can rightfully claim to have set up the foundation for sustained and inclusive growth in our country.  Growth that will in turn generate better returns and further strengthen our banking system.  Growth from investments that will generate a virtuous cycle, improve the lives of Filipinos and make our country a better place.   

On our part, we at the Bangko Sentral commits to work even better to deliver on our mandate concerning the three pillars of central banking:  promoting stable prices through responsive monetary policies;  maintaining a reliable and efficient payments and settlement system; and ensuring a sound and stable banking system. In all these, good governance will be our guide along with our corporate values of patriotism, integrity, excellence, dynamism, and solidarity.

Ladies and gentlemen. Behind me, you can see the new logo of the Bangko Sentral highlighted by the Philippine eagle: a symbol of strength, clear vision and freedom, the qualities we aspire for as a central bank. We are also proud of our new generation banknotes that pay tribute to Filipinos who played significant roles at various moments of our nation's history and feature World heritage sites and iconic natural wonders we are proud of as Filipinos.

Finally, we at the Bangko Sentral ng Pilipinas thank all of our special guests for your continuing support.  We have accomplished much in the past years because you have worked with us in crafting and implementing challenging reforms that have made our banking system sound and stable through difficult periods. If we remain united in pursuing much-needed reforms, we can transform our banking system to become even stronger and an even more effective catalyst for development.               

At this point, may I invite all of you to offer a toast to a better Philippines…. where peace reigns, good governance prevails, and development is truly inclusive.

Mabuhay ang Pilipinas!

Thank you and let's enjoy the rest of the evening. 

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