BANGKO SENTRAL NG PILIPINAS

The Bangko Sentral ng Pilipinas (BSP) is the central bank of the Republic of the
Philippines. It was established on 3 July 1993 pursuant to the provisions of the 1987 Philippine
Constitution and the New Central Bank Act of 1993. The BSP took over from Central Bank of
Philippines, which was established on 3 January 1949, as the country’s central monetary
authority. The BSP enjoys fiscal and administrative autonomy from the National Government in
the pursuit of its mandated responsibilities.

Mandate, Functions and Responsibilities of BSP

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The BSP's main responsibility is to formulate and implement policy in the areas of
money, banking and credit with the primary objective of preserving price stability.

As prescribed by the New Central Bank Act, the main functions of the Bangko Sentral are:

 Liquidity management, by formulating and implementing monetary policy aimed at

influencing money supply, consistent with its primary objective to maintain price
stability,
  Currency issue. The BSP has the exclusive power to issue the national currency. All notes
and coins issued by the BSP are fully guaranteed by the Government and are considered
legal tender for all private and public debts,
 Lender of last resort, by extending discounts, loans and advances to banking institutions
for liquidity purposes,
 Financial supervision, by supervising banks and exercising regulatory powers over non-
bank institutions performing quasi-banking functions,
 Management of foreign currency reserves, by maintaining sufficient international
reserves to meet any foreseeable net demands for foreign currencies in order to preserve
the international stability and convertibility of the Philippine peso,
 Determination of exchange rate policy, by determining the exchange rate policy of the
Philippines. Currently, the BSP adheres to a market-oriented foreign exchange rate
policy, and
 Being the banker, financial advisor and official depository of the Government, its
political subdivisions and instrumentalities and GOCCs.

The basic structure of the Bangko Sentral includes:

1. The Monetary Board, which exercises the powers and functions of the BSP, such as the
conduct of monetary policy and supervision of the financial system;

2. The Monetary Stability Sector, which takes charge of the formulation and implementation
of the BSP's monetary policy, including serving the banking needs of all banks through
accepting deposits, servicing withdrawals and extending credit through the rediscounting
facility;

3. The Supervision and Examination Sector, which enforces and monitors compliance to
banking laws to promote a sound and healthy banking system; and

4. The Resource Management Sector, which serves the human, financial and physical
resource needs of the BSP.

The powers and function of Bangko Sentral are exercised by its Monetary Board, whose
seven members are appointed by the President of the Philippines. As provided for by RA 7653 or
the New Central Bank Act, one of the government sector members of the Monetary Board must
also be a member of Cabinet. Members of the Monetary Board are prohibited from holding
certain positions in other government agencies and private institutions that may give rise to
conflicts of interest. The members have fixed and overlapping terms, except for the Cabinet
Secretary representing the incumbent administration.

The current members of the Monetary Board are:

 Benjamin Diokno, BSP Governor and Chairman of the Monetary Board

o Francisco G. Dakila, Jr. – Deputy Governor of the BSP
o Ma. Almasara Tuaño-Amador- Deputy Governor of the BSP
o Chuchi Fonacier- Deputy Governor of the BSP
 Carlos Dominguez III, Secretary of the Department of Finance
  Antonio S. Abacan, Jr.
 V. Bruce J. Tolentino
 Felipe M. Medalla
 Peter B. Favila
 Anita Linda Aquino

HOW DOES IT AFFECT THE FINANCIAL MARKET OF THE COUNTRY?

Price stability refers to a condition of low and stable inflation. By keeping price stable, the
BSP helps ensure strong and sustainable economic growth and better living standards. The
objective of the BSP's monetary policy is to promote a low and stable inflation conducive to a
balanced and sustainable economic growth. However, monetary operations refer to the
buying/selling of government securities, lending/borrowing against underlying assets as
collateral, acceptance of fixed-term deposits, foreign exchange swaps, and the use of other
monetary instruments of the Bangko Sentral aimed at influencing the underlying demand and
supply conditions for central bank money. Monetary policy affects interest rates and the
available quantity of loanable funds, which in turn affects several components of aggregate
demand. Tight or contractionary monetary policy that leads to higher interest rates and a reduced
quantity of loanable funds will reduce two components of aggregate demand.

The promotion of “Financial Stability” is a formal mandate that is uniquely ascribed to the
Bangko Sentral ng Pilipinas (BSP). This is provided for in the amended BSP Charter (Republic
Act No. 11211) which was signed by President Duterte in February 2019.
The objective of Financial Stability is to enhance the resilience of the financial system, in its
totality and in its components, from shocks. Volatility or minor disruptions in financial markets
that represent the ebb and flow of a dynamic economy are not a concern, but disruptions to the
financial system that interfere with its ability to provide valuable credit, risk-management,
payment, and liquidity services to businesses and households can interfere with the economy’s
ability to achieve and maintain stable prices and maximum employment. An unstable financial
system can propagate adverse macroeconomic shocks over broad economic sectors and over time
to the detriment of macroeconomic stability. In the other direction, well-formulated and well-
communicated monetary policy supports financial stability by allowing households, firms, and
financial institutions to make better investment, saving, borrowing, and lending decisions, and
price stability eliminates a source of asset-price volatility.

Payment systems are essential to the effective functioning of financial systems worldwide.
They provide the channels through which funds are transferred among banks and other
institutions to discharge payment obligations arising from economic and financial transactions
across the entire economy. An efficient, secure and reliable payment system reduces the cost of
exchanging goods and services, and it is an essential tool for the effective implementation of
monetary policy, and the smooth functioning of money and capital markets.
Reference:

https://www.bsp.gov.ph/SitePages/AboutTheBank/AboutTheBank.aspx

https://en.wikipedia.org/wiki/Bangko_Sentral_ng_Pilipinas

Bank lending slips for 8th straight month in July

Link: https://www.bworldonline.com/bank-lending-slips-for-8th-straight-month-in-july/

1. What was the policy being maintained by Bangko Sentral on lending activities?
The policy that the Bangko Sentral being maintains on lending activities is the Monetary
Policy. The policy will continue to prioritize to ensure the continued momentum of economic
recovery. Monetary Policy controls the overall supply of money that is available to the nation’s
bank, its consumers and businesses. The Bangko Sentral may force up interest rates on
borrowing in order to discourage spending or force down interest rates to inspire more borrowing
and spending. Moreover, after cutting policy rates by 200 basis points in 2020, policy rates are
now at an all-time low. The BSP maintained the key policy rate at 2%.

2. What was the cause of the continuous decline?

The cause of the eighth straight month of lending decline was due to pandemic and the
nation’s community quarantine and lockdown that the government implemented for the safety of
the people. UnionBank of the Philippines Inc. expects lighter restrictions to have a softer
negative impact on credit growth.