Today marks the 30th year since the establishment of the Bangko Sentral ng Pilipinas (BSP). The BSP, like other central banks across the world, primarily aims to deliver price stability that contributes to economic growth.
But while the BSP was instituted only in 1993, central banking was already being developed in the Philippines decades prior.
Way back 60 years before the New Central Bank Act of 1993 created the BSP, some Filipinos already formed an idea of a central bank in the country. The discourse over having a central bank went on in the following years, during the Commonwealth period.
In 1939, a law was passed for the establishment of a central bank, as stipulated by the Tydings-McDuffie Act. But because of strong opposition from vested interests, it was disapproved by then-US President Franklin D. Roosevelt. Another law was passed amid the Japanese occupation in 1944, though its implementation was called off with the arrival of American liberalization forces.
A charter for a central bank was then instructed to be formulated by former president Manuel Roxas to Finance Secretary Miguel Cuaderno, Sr. in 1946. By June of 1948, Elpidio Quirino, the successor of Mr. Roxas, signed the Republic Act (RA) No. 265 or the Central Bank Act of 1948, which established the Central Bank of the Philippines (CBP).
Changes were made in the subsequent years for the charter to respond to the economy’s needs. These included the recommendations of the Joint IMF-CB Banking Survey Commission being adopted by the Presidential Decree (PD) No. 72 and the CBP’s designation as the central monetary authority through PD 1801.
In accordance with a provision in the 1987 Constitution, Former President Fidel V. Ramos signed RA 7653, or the New Central Bank Act, which took effect on July 3, 1993.
The BSP remembered that day for its establishment as an independent monetary authority. Unlike the CBP from before, the BSP has fiscal and administrative autonomy from the National Government.
As the bank maintains working on the objective of price stability through the years, the BSP provides the policy directions concerning money, banking, and credit as well as supervision of the banking sector operations.
Over its three decades of service, the central bank has implemented several frameworks, regulations, and approved guidelines for the sector.
Bangko Sentral ng Pilipinas Former Governor Felipe M. Medalla (seated center) signed a memorandum of agreement with Department of Migrant Workers (DMW) Secretary Susana V. Ople (seated left) and BDO Foundation (BDOF) President Mario A. Deriquito (seated right) for the continuation of the Pinansyal na Talino at Kaalaman (PiTaKa), a program that teaches OFWs and their families the value of saving, investing, and achieving financial stability. Also shown in the photo are: (standing from left) BSP Deputy Governor Mamerto E. Tangonan, Monetary Board Member Antonio S. Abacan, Jr., Monetary Board Member Anita Linda R. Aquino, Monetary Board Member V. Bruce J. Tolentino, Monetary Board Member Eli M. Remolona, BSP Deputy Governor Bernadette Romulo-Puyat, and BSP Deputy Governor Francisco G. Dakila, Jr. — Photo from bsp.gov.ph
Among these were the guidelines governing the issuance of e-money and the issuers’ operations in the country back in 2009. But as early as 2004, the central bank adopted the “test and learn” approach for the regulation of e-money issuers. In 2017, the central bank also approved the guidelines for Virtual Currency Exchanges.
Another objective sought by the BSP is to promote extensive and convenient access to high-quality financial services.
In 2001, the central bank adopted microfinance as a flagship program, aiming for poverty alleviation and financial inclusion. It continues to work on making financial services inclusive for Filipinos up to this day, especially with the value of financial inclusion having been underscored during the coronavirus disease 2019 (COVID-19) crisis.
The BSP is not a stranger to crisis, having faced the Asian financial crisis in 1997 and the 2008-2009 Global Financial Crisis. But in 2020, the BSP, along with every organization, began to deal with the unprecedented COVID-19 pandemic, which provoked not only a crisis in public health but also in the economy.
At the time of COVID-19, the central bank carried out various measures to do its part in mitigating the impact of the crisis. One of these measures was reducing the credit risk weights of loans given to micro, small, and medium-sized enterprises (MSMEs).
Despite the challenges of the pandemic, it also presented an opportunity for the central bank to accelerate its efforts for financial inclusion and digital transformation.
“Far from being an impediment, the pandemic has strengthened the BSP’s resolve to promote broad and convenient access to welfare-enhancing financial services for all Filipinos,” the central bank said in its 2020 Financial Inclusion Initiatives report.
The country had already released its first National Strategy for Financial Inclusion (NSFI) in 2015. To drive its implementation, Executive Order No. 208 created the Financial Inclusion Steering Committee (FISC) a year later, in which BSP is the chair. The FISC updated the NSFI in 2021, now serving as a blueprint for the period of 2022 to 2028.
Meanwhile, the BSP’s aim for a digital transformation of payments also sped up during the COVID-19 crisis.
“My goal to shift at least 50% of payment transactions into digital form has also been fast-tracked because of the pandemic. With various quarantine measures being observed and physical distancing as a norm during this time, electronic means of payment have been essential. This is evident in the substantial increase in transactions in PESONet and InstaPay, the two automated clearing houses (ACHs) formed under the National Retail Payment System (NRPS),” Benjamin E. Diokno, former governor of BSP, said in the central bank’s publication titled BSP Unbound: Central Banking and the COVID-19 Pandemic in the Philippines.
Under its Digital Payments Transformation Roadmap for 2020 to 2023, the BSP seeks to turn 50% of the total volume of retail payments into digital, as well as onboard 70% of Filipino adults to the formal financial system, thereby increasing the financially included.
“The BSP’s thrust to promote financial inclusion and digitalization of payments are mutually reinforcing: they go hand-in-hand, each enabling the other. As the BSP continues to foster the growth and development of digital payment innovations through enabling policies and regulations, it also promotes further financial inclusion. Digital payment innovations lower transaction costs and eliminate the oft-cited barriers to owning a transaction account,” the central bank stated on the roadmap.
Last March, outgoing BSP Governor Felipe M. Medalla expressed the central bank’s confidence in reaching such targets on its digital transformation roadmap this year.
Mr. Medalla shared last month that digital payments now accounted for more than 40% of the total volume of retail transactions in the country, thanks to the rise of e-wallet accounts.
Outgoing BSP Governor Felipe M. Medalla (fifth from left), Palawan Provincial Governor Victorino Dennis M. Socrates (fourth from left), and Puerto Princesa Mayor Lucilo R. Bayron (sixth from left) lead the ribbon-cutting ceremony for the central bank’s newest branch in Puerto Princesa City on June 15. According to Mr. Medalla, the BSP’s Puerto Princesa branch will further enhance access to clean banknotes and coins for Filipinos in the Mindoro, Marinduque, Romblon, and Palawan region. Also present during the inauguration were (from left) Puerto Princesa Vice-Mayor Maria Nancy M. Socrates and Monetary Board Members V. Bruce J. Tolentino, Peter B. Favila, Anita Linda R. Aquino, and Antonio S. Abacan Jr. — Photo from Bangko Sentral ng Pilipinas
Meanwhile, the central bank’s data showed that the number of banked Filipinos increased to 56% of the population in 2021 from 29% in 2019.
Digitalization and financial inclusion, along with capital market development, should be the focus of the next governor of BSP, according to Mr. Medalla.
Monetary Board Member Eli M. Remolona is appointed as the next BSP governor and Monetary Board chairman. Commencing his term today, Mr. Remolona serves as the seventh governor since the New Central Bank Act was enacted or the BSP was established 30 years ago. — Chelsey Keith P. Ignacio