BSP seeks additional P150-B capital
MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) is asking for an additional capital of P150 billion to better perform its functions in promoting monetary and price stability.
The additional capital, payable in three years until 2017, is under the BSP’s proposed amendments to its charter, central bank deputy governor Vicente S. Aquino told a forum on Saturday.
“The scale and complexity of the responsibilities of the BSP have been magnified by the growth of the Philippine economy and the expansion of its financial system,” Aquino said, noting the additional capital “will enable the BSP to meet the needs of the expanding economy and growing complexity and sophistication of the financial system.”
Moreover, this “will allow BSP to pursue its mandate of price stability conducive to a balanced and sustainable growth of the economy [as] the conduct of monetary policy involves a range of financial risks and costs that results from policy decisions by the BSP,” he continued.
The New Central Bank Act or Republic Act 7653, enacted in 1993, mandated a P50-billion capital infusion for the BSP. At present, only P10 billion remains to be given to the central bank and the national government has already said it would be released later this year.
“Twenty years have already lapsed (since the New Central Bank Act was signed into law) and now we have a globalized economy. We really have to financially strengthen the Bangko Sentral to meet all these risks and contingencies,” Aquino said.
The amendments were proposed by the central bank to lawmakers, Aquino said.
Aside from the P150 billion capitalization, the BSP is also seeking tax exemption from all transactions, as Aquino noted “tax on the BSP means decreased dividends to the national government.”
The BSP also wants the flexibility to establish adequate loss allowances and create reserve buffers against any possible risks and contingencies.
“This will ensure adequate resources so the BSP can effectively respond to inflation pressures through policy actions and will allow BSP to mitigate risks and contingencies inherent in carrying out mandated functions as a central monetary authority,” Aquino said.
He recounted, “this is common practice of other central banks in the region to help sustain operations and ensure financial soundness even during adverse economic conditions.”
Moreover, enhancements to credit operations is also being sought, Aquino added.
Apart from the said amendments, which are meant to reinforce corporate and financial viability, the BSP also seeks to strengthen monetary stability function of the central bank.
“(These are the) restoration of authority to obtain data from any private person/entity, the restoration of authority to issue negotiable certificates of indebtedness even during normal times, and the removal of the thresholds in the growth of monetary aggregates and credit as guiding principles in monetary administration,” Aquino said.
Meanwhile, for the BSP’s strengthening of its financial stability function, the following are proposed under the new amended charter:
• Formal recognition of financial stability in BSP mandate.
• Oversight of payment and settlement systems/operators.
• Expansion of supervisory authority to include additional categories of financial institutions.
• Lifting of the laws on deposit secrecy with respect to BSP examination.
• Imposition of sanctions on transfers and acquisitions of substantial shares of banks and quasi-banks without BSP approval.
• Consultation with the BSP before licenses of banks and supervised entities may be revoked by other government agencies.
• Strengthening of administrative and criminal sanctions.
• Enhance resolution mechanism to deal with problem financial institutions.
• Allow full flexibility to conduct risk-based supervision. and
• Legal protection for BSP officials and staff when performing official duties.
The new proposed BSP Charter also comes with financial reforms such as financial facilities for Islamic banks, Aquino said.
“These amendments, once enacted into law, will empower the BSP to effectively respond to the challenges and innovations of a globalized economy and perform its constitutional mandates,” Aquino said.
“An empowered BSP is indispensable in ensuring a competitive, robust and inclusive economy, and a financial system that delivers a high quality of life for Filipinos,” he added.