HISTORY AND GOVERNANCE OF THE BSP

History of the Bank

Creating a Central Bank for the Philippines

A group of Filipinos had conceptualized a central bank for the Philippines as early
as 1933. It came up with the rudiments of a bill for the establishment of a central
bank for the country after a careful study of the economic provisions of the Hare-
Hawes Cutting bill, the Philippine independence bill approved by the US Congress.

During the Commonwealth period (1935-1941), the discussion about a Philippine

central bank that would promote price stability and economic growth continued.
The country’s monetary system then was administered by the Department of
Finance and the National Treasury. The Philippines was on the exchange standard
using the US dollar—which was backed by 100 percent gold reserve—as the
standard currency.

In 1939, as required by the Tydings-McDuffie Act, the Philippine legislature

passed a law establishing a central bank. As it was a monetary law, it required the
approval of the United States president. However, President Franklin D. Roosevelt
disapproved it due to strong opposition from vested interests. A second law was
passed in 1944 during the Japanese occupation, but the arrival of the American
liberalization forces aborted its implementation.
Shortly after President Manuel Roxas assumed office in 1946, he instructed then
Finance Secretary Miguel Cuaderno, Sr. to draw up a charter for a central bank.
The establishment of a monetary authority became imperative a year later as a
result of the findings of the Joint Philippine-American Finance Commission
chaired by Mr. Cuaderno. The Commission, which studied Philippine financial,
monetary and fiscal problems in 1947, recommended a shift from the dollar
exchange standard to a managed currency system. A central bank was necessary to
implement the proposed shift to the new system.
Immediately, the Central Bank Council, which was created by President Manuel
Roxas to prepare the charter of a proposed monetary authority, produced a draft. It
was submitted to Congress in February1948. By June of the same year, the newly-
proclaimed President Elpidio Quirino, who succeeded President Roxas, affixed his
signature on Republic Act No. 265, the Central Bank Act of 1948. The
establishment of the Central Bank of the Philippines was a definite step toward
national sovereignty. Over the years, changes were introduced to make the charter
more responsive to the needs of the economy. On 29 November 1972, Presidential
Decree No. 72 adopted the recommendations of the Joint IMF-CB Banking Survey
Commission which made a study of the Philippine banking system. The
Commission proposed a program designed to ensure the system’s soundness and
healthy growth. Its most important recommendations were related to the objectives
of the Central Bank, its policy-making structures, scope of its authority and
procedures for dealing with problem financial institutions.
Subsequent changes sought to enhance the capability of the Central Bank, in the
light of a developing economy, to enforce banking laws and regulations and to
respond to emerging central banking issues. Thus, in the 1973 Constitution, the
National Assembly was mandated to establish an independent central monetary
authority. Later, PD 1801 designated the Central Bank of the Philippines as the
central monetary authority (CMA). Years later, the 1987 Constitution adopted the
provisions on the CMA from the 1973 Constitution that were aimed essentially at
establishing an independent monetary authority through increased capitalization
and greater private sector representation in the Monetary Board.
The administration that followed the transition government of President Corazon
C. Aquino saw the turning of another chapter in Philippine central banking. In
accordance with a provision in the 1987 Constitution, President Fidel V. Ramos
signed into law Republic Act No. 7653, the New Central Bank Act, on 14 June
1993. The law provides for the establishment of an independent monetary authority
to be known as the Bangko Sentral ng Pilipinas, with the maintenance of price
stability explicitly stated as its primary objective. This objective was only implied
in the old Central Bank charter. The law also gives the Bangko Sentral fiscal and
administrative autonomy which the old Central Bank did not have. On 3 July 1993,
the New Central Bank Act took effect.
The Monetary Board exercises the powers and functions of the BSP, such as the
conduct of monetary policy and supervision of the financial system. Its chairman is
the BSP Governor, with five full-time members from the private sector and one
member from the Cabinet.
The Governor is the chief executive officer of the BSP and is required to direct and
supervise the operations and internal administration of the BSP. A deputy governor
(or a Senior Assistant Governor in the case of the Currency Management Sector)
heads each of the BSP's operating sector as follows:
 Monetary and Economics Sector is mainly responsible for the
operations/activities related to monetary policy formulation,
implementation, and assessment
 Financial Supervision Sector is mainly responsible for the regulation of
banks and other BSP-supervised financial institutions, as well as the
oversight and supervision of financial technology and payment systems
 Currency Management Sector is mainly responsible for the forecasting,
production, distribution, and retirement of Philippine currency, as well as
security documents, commemorative medals, and medallions
 Corporate Services Sector is mainly responsible for the effective
management of corporate strategy, communications, and risks, as well as
the BSP's human, financial, technological, and physical resources to support
the BSP's core functions
The Monetary Board
The powers and function of Bangko Sentral are exercised by its Monetary Board,
which has seven members appointed by the President of The Philippines. Under the
New Central Bank Act, one of the government sector members of the Monetary
Board must also be a member of the Cabinet designated by the President.
The New Central Bank Act establishes certain qualifications for the members of
the Monetary Board and also prohibits members from holding certain positions
with other governmental agencies and private institutions that may give rise to
conflicts of interest. With the exception of the members of the Cabinet, the
Governor and the other members of the Monetary Board serve terms of six years
and may only be removed for cause.
The Monetary Board meets at least once a week. The Board may be called to a
meeting by the Governor of the Bangko Sentral or by two (2) other members of the
Board. Usually, the Board meets every Thursday but on some occasions, it
convenes to discuss urgent issues.
In the exercise of its authority, the Monetary Board shall:
1. Issue rules and regulations it considers necessary for the effective
discharge of the responsibilities and exercise of the powers vested upon the
Monetary Board and the Bangko Sentral;

2. Direct the management, operations, and administration of the Bangko

BSP’s ORGANIZATIONAL STRUCTURE
Sentral, reorganize its personnel, and issue such rules and regulations as it
may deem necessary or convenient for this purpose. The legal units of the
Bangko Sentral shall be under the exclusive supervision and control of the
Monetary Board;

3. Establish a human resource management system which shall govern the

selection, hiring, appointment, transfer, promotion, or dismissal of all
personnel. Such system shall aim to establish professionalism
and excellence at all levels of the Bangko Sentral in accordance with sound
principles of management.
A compensation structure, based on job evaluation studies and wage surveys
subject to the Board's approval, shall be instituted as an integral component
of the Bangko Sentral's human resource development program.
On the recommendation of the Governor, appoint, fix the remunerations and other
emoluments, and remove personnel of the Bangko Sentral, subject to pertinent civil
service laws: Provided, That the Monetary Board shall have exclusive and final
authority to promote, transfer, assign, or reassign personnel of the Bangko Sentral
and these personnel actions are deemed made in the interest of the service and not
disciplinary: Provided, further, That the Monetary Board may delegate such
authority to the Governor under such guidelines as it may determine;
4. Adopt an annual budget for and authorize such expenditures by the Bangko
Sentral in the interest of the effective administration and operations of the
Bangko Sentral in accordance with applicable laws and regulations; and
5. Indemnify its members and other officials of the Bangko Sentral, including
personnel of the departments performing supervision and examination
functions against all costs and expenses reasonably incurred by such
persons in connection with any civil or criminal action, suit or proceedings
to which he may be, or is, made a party by reason of the performance of his
functions or duties, unless he is finally adjudged in such action or
proceeding to be liable for negligence or misconduct.
The BSP Monetary Board
Chairman: Benjamin E. Diokno
Members: Peter B. Favila Antonio S. Abacan, Jr. V. Bruce J.
Tolentino Anita Linda R. Aquino Eli M. Remolona
The Governor
Pursuant to Republic Act No. 7653 (The New Central Bank Act), the Governor
shall be the chief executive officer of the Bangko Sentral. His powers and duties
shall be to:
1. Prepare the agenda for the meetings of the Monetary Board and to submit for the
consideration of the Board the policies and measures that he believes to be
necessary to carry out the purposes and provisions of said Act;
2. Execute and administer the policies and measures approved by the Monetary
Board;
3. Direct and supervise the operations and internal administration of the Bangko
Sentral. The Governor may delegate certain of his administrative responsibilities to
other officers or may assign specific tasks or responsibilities to any full-time
member of the Monetary Board without additional remuneration or allowance
whenever he may deem fit or subject to such rules and regulations as the Monetary
Board may prescribe;
4. Appoint and fix the remunerations and other emoluments of personnel below the
rank of a department head in accordance with the position and compensation plans
approved by the Monetary Board, as well as to impose disciplinary measures upon
personnel of the Bangko Sentral, subject to the provisions of Section 15(c) of said
Act: Provided, That removal of personnel shall be with the approval of the
Monetary Board;
5. Render opinions, decisions, or rulings, which shall be final and executory until
reversed or modified by the Monetary Board, on matters regarding application or
enforcement of laws pertaining to institutions supervised by the Bangko Sentral
and laws pertaining to quasi-banks, as well as regulations, policies or instructions
issued by the Monetary Board, and the implementation thereof; and
6. Exercise such other powers as may be vested in him by the Monetary Board.
The Governor of the Bangko Sentral shall be the principal representative of the
Monetary Board and of the Bangko Sentral and, in such capacity and in accordance
with the instructions of the Monetary Board, he shall be empowered to:
1. Represent the Monetary Board and the Bangko Sentral in all dealings with other
offices, agencies and instrumentalities of the Government, and all other persons or
entities, public or private, whether domestic, foreign or international;
2. Sign contracts entered into by the Bangko Sentral, notes and securities issued by
the Bangko Sentral, all reports, balance sheets, profit and loss statements,
correspondence, and other documents of the Bangko Sentral;
3. Represent the Bangko Sentral, either personally or through counsel, including
private counsel, as may be authorized by the Monetary Board, in any legal
proceedings, action or specialized legal studies; and
4. Delegate his power to represent the Bangko Sentral, to other officers upon his
own responsibility: Provided, however, That in order to preserve the integrity and
the prestige of his office, the Governor of the Bangko Sentral may choose not to
participate in preliminary discussions with any multilateral banking or financial
institution on any negotiations for the Government within or outside the
Philippines. During the negotiations, he may instead be represented by a
permanent negotiator.
Profile of the Governor
Felipe M. Medalla
Dr. Felipe Medalla, the
current Governor of the Bangko Sentral
ng Pilipinas, is a seasoned economist
and educator whose career spans more
than four decades and four
administrations.
Dr. Medalla has been a
member of the policymaking Monetary
Board since July 2011, having been
appointed by former President Benigno
Aquino III and President Rodrigo
Duterte in July 2017.
Before joining the Monetary
Board, he was a prominent figure in the
academe, having taught at the
University of the Philippines-School of Economics (UPSE) from 1991 to 2011. He
also served as UP vice president of planning and finance from 1988-1991 before
being named dean of the UPSE from 1994-1998.
In 1998, Dr. Medalla was appointed Secretary of Socio-Economic
Planning and Director-General of the National Economic and Development
Authority by then-President Joseph Estrada.
Dr. Medalla was President of the Philippine Economic Society in 1996
and executive director of the Philippine Center for Economic Development from
1994-1998. He was Chairman of the Foundation for Economic Freedom, a non-
governmental organization that is primarily engaged in public advocacy for fiscal
reforms and market-friendly government policies, from 2002-2011. His research
contribution explores different facets of economic development and monetary
policy, from manufacturing growth, debt management, taxation, exchange rate
policy, and inflation, among others.
Dr. Medalla earned his Ph.D. in Economics from Northwestern
University in Evanston, Illinois and his M.A. in Economics from the University of
the Philippines. A certified public accountant, he graduated cum laude from De La
Salle University with an economics-accounting degree.
(as of 17 November 2022)
ANTI-MONEY LAUNDERING COUNCIL(AMLC)
The BSP Governor acts as the Chairman of the AMLC, which was created
pursuant to Republic Act (R.A.) No. 9160, otherwise known as the “Anti-Money
Laundering Act of 2001” (AMLA), to protect the integrity and confidentiality of
bank accounts and to ensure that the Philippines shall not be used as a money
laundering site for the proceeds of any unlawful activity.The Council performs its
functions through the AMLC Secretariat,which is primarily tasked to receive
transaction reports from covered institutions, investigate suspicious transactions,
and cause the filing of complaints or petitions for the prosecution of money
laundering offenses and other AMLA violations. Section 8 of R.A. No. 9160
provides that all members of the AMLC Secretariat shall hold full-time permanent
positions within the BSP.
INTRODUCTION TO CENTRAL BANKS
Introduction - What is Central Banking
 At its most fundamental level, a central bank is simply a bank which other
banks have in common.
 Simply, a central bank is usually a government sanctioned bank that has
specific duties related to the performance of the macroeconomy. Typically,
an "official" central bank is charged by a central government to control the
money supply for the purpose of promoting economic stability.
 It may have other duties as well, such as some degree of regulatory power
over the financial system, operating a check-clearing system, or to perform
general banking services for the central government. Most industrialized
economies have a central bank.
 The Bank of England, the Bank of Japan, the German Bundesbank, and the
United States Federal Reserve are all central banks.
Characteristics of Central Bank  The BSP aims to be recognized globally as the monetary authority and
primary financial system supervisor that supports a strong economy and
 Single organization: the Central bank is single in every country. No other promotes a high quality of life for all Filipinos.
bank is similar to this types of bank. Hence, no other central bank can be
established, so it is a single organization and as single it has no chance to The BSP Mission
compete with other banks.  To promote and maintain price stability, a strong financial system, and a
 Legal Entity: the Central bank is established by the special ordinance of safe and efficient payments and settlements system conducive to a
government, so it has the legal entity. It is not established as similar to other sustainable and inclusive growth of the economy.
banks. And this legal entity gives central bank special dignity.
 Symbol of economic sovereignty: “Central” is the symbol of economic
sovereignty of the country. This is a unique characteristic of the central
bank. It indicates that the economy of a country is regulated and governed
by an authority.
 Guardian of money Market: This bank has the full control of the money
market. Organizing, directing and controlling the money market is the sole
duties of the central bank.
 Issuance of Note: In a country, this types of banks has the sole right to issue
note and money on behalf of the government. No other bank can do this and
all central bank in all country has the right to issue the note.
 Maintenance of monetary value: This bank works for maintaining the value
of money. For this, it ensures the expected supply of money.
 Clearing House: Central bank arranges clearinghouse for the purpose of
clearing the inter-bank transactions.
 Relation with government: Central bank works as an agent of the
government. It deposits the fund, supply fund, does different activities in the
home and abroad on behalf of the government.
 Lender of the last resort: When banks fall into economic crisis central bank
works as the lender of the last resort. This bank helps other banks in the
crucial moment of fund crisis in the money market.
 Implementing economic policies: One of the main tasks of this bank is
implementing economic policies. The Central bank works for the purpose of Overview of Functions and Operations
implementing the economic policies taken by the government.
 The controller of the scheduled bank: It controls the scheduled bank and Objectives
works as the parent of those banks. All scheduled banks have to do some  The BSP’s primary objective is to maintain price stability conducive to a
mandatory activities given by this bank. balanced and sustainable economic growth. The BSP also aims to promote
 The controller of foreign exchange: It does all kinds of works related to and preserve monetary stability and the convertibility of the national
foreign exchange, exchange rate, reserve, maintaining a relationship with currency.
other country’s central bank.
Responsibilities
 The BSP provides policy directions in the areas of money, banking and
BANGKO SENTRAL NG PILIPINAS credit. It supervises operations of banks and exercises regulatory powers
over non-bank financial institutions with quasi-banking functions.
HISTORY

 Under the New Central Bank Act, the BSP performs the following
functions, all of which relate to its status as the Republic’s central monetary
authority.
 Liquidity Management. The BSP formulates and implements 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. The BSP extends discounts, loans and advances to
banking institutions for liquidity purposes.

 Financial Supervision. The BSP supervises banks and exercises regulatory

powers over non-bank institutions performing quasi-banking functions.

 Management of foreign currency reserves. The BSP seeks to maintain

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. The BSP determines the exchange

rate policy of the Philippines. Currently, the BSP adheres to a market-
oriented foreign exchange rate policy such that the role of Bangko
Sentral is principally to ensure orderly conditions in the market.

 Other activities. The BSP functions as the banker, financial advisor and
official depository of the Government, its political subdivisions and
instrumentalities and government-owned and -controlled corporations.

ABOUT BSP
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 the Central Bank of Philippines, which was
established on 3 January 1949, as the country’s central monetary authority. The
The BSP Vision and Mission BSP enjoys fiscal and administrative autonomy from the National Government in
the pursuit of its mandated responsibilities.
The BSP Vision
The BSP Seal
The new BSP logo is a perfect round shape in blue that features three
gold stars and a stylized Philippine eagle rendered in white strokes. These main
elements are framed on the left side with the text inscription “Bangko Sentral ng
Pilipinas” underscored by a gold line drawn in half circle. The right side remains
open, signifying freedom, openness, and readiness of the BSP, as represented by
the Philippine eagle, to soar and fly toward its goal. Putting all these elements
together is a solid blue background to signify stability.

Principal Elements:
1. The Philippine Eagle, our national bird, is the world’s largest eagle and is a
symbol of strength, clear vision and freedom, the qualities we aspire for as a
central bank.

2. The three stars represent the three pillars of central banking: price stability,
stable banking system, and a safe and reliable payments system. It may also
be interpreted as a geographical representation of BSP’s equal concern for
the impact of its policies and programs on all Filipinos, whether they are in
Luzon, Visayas or Mindanao.

Colors
1. The blue background signifies stability.
2. The stars are rendered in gold to symbolize wisdom, wealth, idealism, and
high quality.
3. The white color of the eagle and the text for BSP represents purity,
neutrality, and mental clarity.

Font or Type Face

 Non-serif, bold for “BANGKO SENTRAL NG PILIPINAS” to suggest
solidity, strength, and stability. The use of non-serif fonts characterized by
clean lines portrays the no-nonsense professional manner of doing business
at the BSP.

Shape
 Round shape to symbolize the continuing and unending quest to become an
excellent monetary authority committed to improve the quality of life of
Filipinos. This round shape is also evocative of our coins, the basic units of
our currency.