BSP pushes major reforms to strengthen banking system

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) continues to introduce major reforms not only to further strengthen the country’s banking system, but also to control financial risks.

BSP Deputy Governor Chuchi Fonacier said the mission critical components of its supervisory agenda could be called SPRINT for Strategic, Proportionate, Risk-focused, Interactive, Next-Generation, and Technology-Driven.

“In racing terms, a SPRINT is a powerful form of physical activity that involves running at a really fast speed over a short interval. Since it is a high-intensity exercise, it is often used to boost stamina and muscle fitness in athletes,” Fonacier said.

She said the regulator’s supervisory strategy intends to build the banking system’s endurance.

According to Fonacier, the BSP’s overall supervisory reform agenda is grounded on the underlying tenets of the BSP’s Continuity++ Framework under BSP Governor Nestor Espenilla Jr.

“Under this umbrella framework, the industry can expect continuous alignment of our financial policy reforms with international standards, the BSP’s active support for capital market reforms and advancement in our financial inclusion agenda,” Fonacier said.

According to the BSP official, the central bank’s policy reform agenda for 2019 would further embed effective risk management systems in banks through enhancements to risk-based capital framework as well as the credit-, liquidity- and operational risk management standards.

The BSP’s risk-based capital framework is being strengthened to consider the adoption of the Basel III revisions to the standardized approach for credit risk and operational risk.

“Even though these initiatives are set to be implemented in 2022, we intend to initiate discussions with the industry on these substantive amendments to ensure that the BSP’s capital rules gives due regard to domestic conditions and bank operations,” she said.

As a means to improve credit concentration risk management in banks, the BSP intends to adopt the 25 percent Basel large exposures limit as part of its existing credit risk management guidelines.

In the coming year, Fonacier said the industry could look forward to more insightful and risk focused publications from the BSP to increase public understanding of systemic and banking risks.

Complementary to the pursuit of the BSP’s regulatory agenda, she said the BSP is set to modernize its internal processes through the adoption of next-generation systems and technology-enabled solutions.

“The BSP’s current supervisory assessment framework shall be transformed into a progressive, seamless, dynamic and more forward-looking supervisory model, with business model and impact analysis, as some of its core attributes,” she said.

According to the BSP official, the central bank shall complete the roll-out of our supervisory technology, or Suptech, projects in 2019 including the Financial Institution portal, the Application Programming Interface system and the automated complaint-handling system.