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Bringing the BSP Closer to the Filipino People in 2020

This report is based on materials submitted in December 2020. The complete 2020 BSP Annual Report will be posted on theBSP website in July 2021.

Published by the BSP Communication Office

CONTENTS1 About the BSP

BSP Vision and Mission 2The BSP: 2020 at a Glance3BSP Actions to Mitigate the Impact of COVID-197

BSP Highlights9

First Pillar: Price Stability 13

Second Pillar: Stable Banking System17

Third Pillar: Eff icient Payments and Settlements System20

Financial Stability22

More Milestones

Financial Inclusion24

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— BENJAMIN E. DIOKNO@GovBenDiokno

FROMTHE GOVERNOR

“The BSP was among the central banks in the world that swiftly responded to the COVID-19 crisis through the deployment of a comprehensive set of measures.

The BSP continues to be front and center of the Philippines’ pandemic economic response by ensuring ample liquidity in the financial system, providing regulatory relief to banks, and implementing policies to assist Filipino businesses and households weather and recover from the crisis.

Without doubt, the effects of the COVID-19 pandemic have been unprecedented in scale. Its reach is global, and its impact disproportionate, especially on the poor. It is for this reason that the BSP’s toolkit also covers measures that incentivize lending to vulnerable sectors of our society.”

Section 20, Article XII, 1987 Constitution

“The Congress shall establish an independent central monetary authority…(which) shall provide policy direction in the areas of money, banking and credit. It shall have supervision over the operations of banks and exercise such regulatory powers as may be provided by law over the operations of finance companies and other institutions performing similar functions.”

Section 1, Article 1, Chapter 1 Republic Act No. 7653 (The New Central Bank Act)

“The State shall maintain a central monetary authority that shall function and operate as an independent and accountable body corporate in the discharge of its mandated responsibilities concerning money, banking and credit. In line with this policy, and considering its unique functions and responsibilities, the central monetary authority established under this Act, while being a government-owned corporation, shall enjoy fiscal and administrative autonomy.”

About the BSP

1

The BSP Vision The BSP aims to be recognized globally as the monetary authority and primary fi-nancial system supervisor that supports a strong economy and promotes a high quality of life for all Filipinos.

The BSP Mission To promote and maintain price stability, a strong financial system, and a safe and efficient payments and settlements system conducive to a sustainable and inclusive growth of the economy.

BSP Values

ExcellenceConsistently

doing our best to master our

craft, continually improving our competencies and learning new things in pursuit of the organizational

goals, comparable to the best

practices of other central banks

PatriotismSelfless

commitment to the service of the Filipino

people and the country

IntegrityPerforming

mandate with

sincerity, honesty and uprightness,

worthy of respect and emulation

from others

SolidarityPerforming with team

spirit; acting and thinking

as one in the pursuit of common goals and objectives

AccountabilityTaking full

responsibility for one’s or group’s

actions

2

BSP acts decisively to cushion impact of COVID-19 pandemic implemented

BSP receives Best Systemic and Prudential Regulator

in Asia Pacific Asian Banker award

National Retail Payment System (NRPS) Core Team

wins the Civil Service Commission’s Regional

Presidential Lingkod Bayan Award

2020 Gold Standard Award for Country and Trade

Promotion

(November 2020)

(December 2020)

BSP sets cap on credit card interest rates and finance

charges(November 2020)

(October 2020)

THE BSP:THE BSP:THE BSP:

BSP AWARDS AND INITIATIVES 3

Philippines remains among global leaders in financial inclusion,

according to the research arm of The Economist Group

Digital Personal Equity and Retirement Account (PERA) introduced

Digital Payments Transformation Roadmap

2020-2023 launched(October 2020)

(September 2020)

THE BSP:THE BSP:THE BSP:

BSP AWARDS AND INITIATIVES

at a Glanceat a Glance20202020

4Details on pages 9-10

5

—BENJAMIN E. DIOKNOAn excerpt from his speech, “Accelerating Digital Transformation in the COVID-19 Era”delivered on Nov.11, 2020

“The COVID-19 era has indeed changed the way we live, work, and play. It has challenged us to try things we have never done before or to quickly adapt to changes, to take unprecedented moves, and to take a step toward a world of new possibilities.”

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BSP ACTIONS TO MITIGATE THE IMPACT OF COVID-19The BSP moved decisively to complement the national government’s broader health and fiscal programs in addressing the effects of the 2020 pandemic

To shore up market confidence and ensure adequate liquidity and credit• Cut the policy rate by a cumulative 200 basis points beginning February 2020• Reduced the reserve requirement ratios by 200 bps for universal and commercial banks and non-bank financial institutions with quasi banking functions, and lowered the RRR by 100 bps of thrift banks and rural/ cooperative banks• Allowed alternative modes of compliance to reserve requirements• Reduced scale of monetary operations for liquidity absorption for most part of Q2 2020, such as the cancellation of term deposit facility auction and lowering of reverse repurchase volume• Lowered the term spread of peso rediscounting loans relative to the overnight lending rate to zero• Opened a window for purchase of government securities in the secondary market

To complement the national government’s broad-based health and fiscal programs through extraordinary liquidity measures• Entered a ₱300 billion repurchase agreement with the national government in March and provided a provisional advance of ₱540 billion to the national government in October.• Remitted ₱20 billion in advance dividends to the national government

To extend financial relief to borrowers• Temporary exclusion of loans of affected borrowers from the past due and non-performing classification• Allowed banks to stagger booking of allowance for credit losses for loans extended to affected borrowers• Banks with outstanding rediscounting obligations with the BSP are entitled to either a grace period for their payments, or restructure the rediscounted loans

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To incentivize lending• Reduced credit risk weights of loans granted to micro, small and medium enterprises (MSMEs)• Allowed peso-denominated loans to MSMEs and certain large enterprises as forms of alternative compliance with banks’/quasi-banks’ reserve requirements against deposit liabilities and deposit substitutes• Temporarily raised the Single Borrower’s Limit • Deferred the implementation of the revised risk-based capital framework for stand-alone thrift banks (TBs) and rural and cooperative banks (R/CBs)• Temporarily reduced the minimum liquidity ratio of stand-alone TBs and R/CBs• Banks/quasi-banks were allowed to utilize capital conservation and Liquidity Coverage Ratio buffers during the crisis situation

To promote continued access to financial services• Relaxed Know Your Customer requirements to facilitate access to formal financing channels• Urged BSP-supervised financial institutions (BSFIs) to suspend fees and charges on use of online banking or e-money, including fees imposed on the use of InstaPay, PESONet, other fund transfer services, and ATM interbank transactions• Waived fees related to the grant of license or authority to provide advanced electronic payment and financial services (EPFS)• Temporarily waived transaction fees charged for fund transfer instructions made with Philippine Payments and Settlements System (PhilPaSS)• Issued guidelines and reminders to augment existing capabilities of BSFIs and enable them to implement appropriate strategies to address the increasing demand for digital channels and effectively manage the attendant risks such as increasing financial crimes and cyber-attacks• Granted operational relief measures for foreign exchange transactions• Encourage BSFIs to extend financial assistance to their staff

To support continued financial services delivery• Eased the BSP reporting requirements• Suspended monetary penalties imposed for delay in the submission of reports• Relaxed notification requirements related to changes in banking hours and temporary closure of bank, branch, branch-lite units and BSFI offices, service units• Temporary approval on the non-imposition of penalties on legal reserve deficiencies • Provided accounting relief measures to reduce the impact of mark-to- market losses on the financial condition• Temporarily eased the exposure limits for the Unit Investment Trust Fund

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BSP hiGhLIGhtSBSP hiGhLIGhtSBest Systemic and Prudential Regulator in Asia Pacific Award from

Asian Banker

In October 2020, the Asian Banker cited the BSP’s aggressive actions to cushion the impact of the COVID-19 pandemic on the economy. According to the Asian Banker, its 2020 awards are aimed at assessing the performance of central banks and financial regulators during the pandemic. The BSP was among the central banks in the world which swiftly responded to the crisis through the deployment of a comprehensive set of measures. These include ensuring ample liquidity in the financial system, providing regulatory relief to banks, and implementing policies to assist Filipino businesses and households weather and recover from the crisis.

Regional Presidential Lingkod Bayan Award from the Civil Service Commission

The BSP’s National Retail Payment System (NRPS) Core Team won the CSC’s Regional Presidential Lingkod Bayan Award in November 2020. The recognition is conferred to an individual or group of individuals “for exceptional or extraordinary contributions resulting from an idea or performance that had nationwide impact on public interest, security and patrimony.” The BSP team received the award only two years after the establishment of the NRPS, which provides the framework to secure promised gains of modernizing retail payments for the benefit of the consumers, the industry, and the economy as a whole.

Global leader in financial inclusion according to the research arm of The Economist Group

The Philippines remains among the global leaders in financial inclusion, according to the Global Microscope 2020 of the Economist Intelligence Unit (EIU), the research arm of The Economist Group.

The country ranks 2nd in Asia, next to India, and 8th worldwide, tied with Brazil, in the EIU study. The study, which was released in the last quarter of 2020, assessed the financial inclusion environment in 55 countries across five dimensions: government and policy, stability and integrity, products and outlets, consumer protection, and infrastructure.

Focusing on the role of financial inclusion in the COVID-19 response, the EIU also recognized the initiatives of the Philippines to mitigate the adverse economic impact of the pandemic.

Ceiling on interest or finance charges for credit card receivables

BSP Circular 1098, which took effect on Nov. 3, 2020, sets a cap on the interest rates or finance charges that may be imposed on the unpaid outstanding credit card balance of a cardholder at a maximum rate of 24 percent per annum or two percent per month. It also prescribes a separate interest rate ceiling for credit card installment loans, which may only be charged a monthly add-on rate of up to one percent. No other charge or fee may be imposed or collected on the availment of credit card cash advances except for a maximum processing fee of ₱200 per transaction.

Digital Payments Transformation Roadmap (DPTR) 2020-2023

The roadmap, approved by the Monetary Board in October 2020, charts the BSP’s current initiatives and strategy in advancing an efficient, inclusive, safe and secure digital payments ecosystem. It outlines the BSP’s three-year priority policy initiatives, with the twin goals of shifting at least 50% of retail payment transactions to digital, and having at least 70% of adult Filipinos owning and using a bank account or e-wallet by 2023.

The DPTR aims to successfully transform the cash-heavy Philippine economy into a cash-lite economy. It supports this vision by providing key stakeholders, such as banks, financial and payment service providers, fintech service players, and consumers with a helpful strategic guide in navigating the country’s whole-of-nation approach toward a digital payments-enabled economy.

Digital Personal Equity and Retirement Account (PERA)

The BSP launched its digital platform for PERA in September 2020, aiming to boost retirement savings using convenient and affordable programs. PERA is a voluntary retirement account that can be a supplementary source of retirement benefits in addition to state-sponsored retirement programs implemented by the Social Security System or Government Service Insurance System. It is structured to encourage Filipinos to invest in long-term retirement savings products while enjoying certain tax incentives.

Its digitalization is seen to enable PERA-accredited banks and financial institutions to provide convenient and affordable retirement savings products.

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2020 Gold Standard Award for Country and Trade Promotion

The award, given by industry body Public Affairs Asia on Dec. 8, 2020, recognizes the BSP’s efforts in ensuring that the international investment community sees a truthful and transparent picture of the Philippine economy and is aware of the ample investment opportunities in the country.

Photo taken during the 1st Financial Stability Policy Committee (FSPC) Meeting held on Feb. 26, 202011

— BENJAMIN E. DIOKNOAn excerpt from his speech, “The Philippine Economy in 2020:

Looking Back, Moving Forward”, delivered on Jan. 9, 2020

“We are firmly committed to fulfilling our price and financial stability mandates, while advocating for inclusive growth. We continue to remain on top of developments, and stand ready to use all possible tools to address any external or domestic shock.”

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FIRST PILLAR:PRiceStaBiLity

Inflation

Timely and comprehensive analyses of the economic and financial impact of the pandemic were conducted to support the monetary policy decisions of the Monetary Board, including decisions on adjustments in the overnight reverse repurchase (RRP) rate and the reserve requirements (RR). The actions of the BSP have helped maintain average inflation within the target, stabilize financial markets and complement the national government’s efforts to provide stimulus to the economy.

Keeping prices within target benefits the public by fostering a conducive macroeconomic environment supportive of investments, job generation, and employment. Stable prices also benefit the poor most, specifically the lowest income rungs of the population. The BSP’s monetary policy action also helped the banking system continue to provide credit, especially to micro, small, and medium enterprises or MSMEs, which employ a majority of Filipino workers.

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. Price stability refers to a condition of low and stable inflation. By keeping prices stable, the BSP helps ensure strong and sustainable economic growth and better living standards.

External debt management

The central monetary authority remains steadfast in managing the country’s external debt to ensure servicing of these obligations in an orderly and timely manner and ascertain that the external debt level remains sustainable.

The BSP facilitated the approval of US$13.6 billion in public sector medium to long-term foreign borrowings as of Oct. 31, 2020. Of the total US$13.6 billion MB-approved public sector loans, US$7.4 billion or 54.1 percent were for COVID-19 pandemic response initiatives.

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In addition, the BSP also recognized the pivotal role of the private sector in propelling the country’s economic growth by facilitating the registration of several private sector borrowings to fund legitimate transactions. As of end-September 2020, the BSP registered 170 foreign loan accounts and 36 loan accounts involving amendments to loan terms aggregating US$4.4 billion and US$498 million, respectively. These foreign loans were used for working capital purposes, purchase of raw materials, expansion activities, and payment of existing loan obligations.

Loans and credit

To provide substantial fiscal stimulus to the economy and address the adverse impact of the COVID-19 pandemic in the Philippines, the BSP heeded the urgent request of the national government for provisional advances in the amount of ₱540 billion to finance expenditures authorized in the 2020 General Appropriations Act. The loan is evidenced by a non-negotiable and non-interest-bearing promissory note dated Oct. 6, 2020 with a maturity date of Dec. 29, 2020.

The BSP also implemented temporary measures in its rediscounting facilities (RF) aimed at providing needed liquidity to banks to support the flow of credit and spur economic activities. Specifically, these measures involved lowering the effective lending rates on BSP RF to allow the banks to pass the lower rates to their customers and encourage them to extend loans and other form of financial accommodation to help businesses recover from the adverse economic impact of the pandemic.

Foreign exchange policy formulation andimplementation

The BSP issued Circular No. 1080, dated March 27, 2020, to ensure that BSP stakeholders have continued access to foreign exchange (FX) from the banking system for resident-to-resident, trade and non-trade current accounts, borrowing, and investment transactions.

The BSP also issued related Circular Letters to provide additional relief measures to its stakeholders.

Economic learning activities

Before the COVID-19 crisis, the BSP had regularly held public information campaigns on its role in the economy, its core functions and responsibilities, and essential economic concepts and issues. It continued to do so during the pandemic, albeit in a different mode, bringing the BSP closer to the Filipino people by providing economic education through various digital platforms, such as webinars and webcasts.

In addition, the BSP library has regularly sent updates to partner libraries all over the country through a monthly newsletter. This engagement via the BSP’s Knowledge Resource Network (KRN) supports economic and financial literacy and brings BSP resources within reach of the Filipino people.

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— BENJAMIN E. DIOKNOAn excerpt from his message during the

Q3 2020 BSP Inflation Report Briefing,Oct. 30, 2020

“On the part of the BSP, we wish to assure the public of our commitment to data-driven monetary decision-making to enable the Philippines to navigate through the pandemic with minimal economic scarring. In this regard, the BSP will continue to deploy its full range of monetary instruments and regulatory relief measures, as needed, in fulfillment of its mandate of promoting non-inflationary and sustainable economic growth.”

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Photo taken during the YPO Forum on Monetary Policy held on Aug. 8, 2019

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total number of new advanced electronic payment and financial services (EPFS) of BSFIs approved by the BSP from March to September 2020

total number of existing electronic money issuers (EMI) and virtual currency exchanges (VCE), after the BSP processed eight new nonbank EMIs, two nonbank EMIs with VCE services, and three VCEs in 2020

number of depositors with Basic Deposit Accounts as of 1st Quarter 2020

105total number of banking offices, comprised of 13 branches and 92 branch lite units, approved for establishment by the BSP

27 36

2020202020202020BY THE NUMBERS

amount of provisional advance provided by the BSP to the national government to complement its broad-based healthy and fiscal programs through extraordinary liquidity measures

4.6million

₱540billion

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SECOND PILLAR:

a StaBLeBanKInG SySteM

In pursuit of its mandate to promote a secure and reliable banking system and maintain financial stability, the BSP has ensured the safe and sound operation of banks and other BSP-supervised financial institutions (BSFIs).

Promotion of sustained safety and soundness of BSFIs

The conduct of effective supervision on BSFIs and adoption of proportionate regulations and supervision have contributed to the sustained safety and soundness of the financial system and prepared the industry to withstand the impact of the COVID-19 pandemic.

The banking industry was in a position of strength going into the throes of the crisis, supported by strong capital and liquidity positions and effective risk management practices. This enabled banks and other BSFIs to continue to provide financial services to support households and businesses amid the pandemic.

Ensuring continuing financial services amid the pandemic

The BSP promptly issued timely, time-bound and critical prudential relief measures to ensure continuing availability of financial services amid the pandemic. It also introduced enhancements and innovations to its licensing processes as part of its commitment to promote the ease of doing business and to broaden financial access points nationwide.

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Promotion of financial inclusion throughIslamic finance

The BSP promoted financial inclusion, especially in underserved areas in southern Philippines, such as the Bangsamoro Autonomous Region in Muslim Mindanao. The central bank issued preliminary regulations related to Islamic finance, including Circular No. 1069 on the Guidelines on the Establishment of Islamic Banks and Islamic Banking Units (IBUs), Circular No. 1070 on the Shari’ah Governance Framework, and Frequently Asked Questions on Islamic Banking through Memorandum No. 2020-052 dated June 18, 2020.

—BENJAMIN E. DIOKNOAn excerpt from his speech,“Philippine Banking System:

The Green Shoots of Recovery”delivered on Nov. 17, 2020

“Despite the adverse impact of the current health crisis on the domestic financial system, the Philippine banking system is poised to remain stable, sound, resilient, and inclusive in years to come.”

Photo taken during the BSP-BIS Conference on Inflation Dynamics in Asia and the Pacific held on Aug. 19, 2019

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Efficient registration and licensing of non-bank financial institutions (NBFIs)

The registration process was streamlined and rationalized for pawnshop and money service business (MSB) applications through the revised BSP Citizen’s Charter, as published in the BSP website, effective July 28, 2020. The process was further enhanced through New Economy Arrangement (NEA) initiatives such as “cashless” and online payment through an online portal, shift to electronic submission and release of documents to BSFIs, and virtual presentations for BSFI applicants.

Prompt processing and evaluation of requestsfrom BSFIs

A total of 105 banking offices, comprised of 13 branches and 92 branch-lite units, were approved for establishment. The BSP also approved 36 new advanced electronic payment and financial services (EPFS) of BSFIs from March to September 2020.

Processing of new electronic money issuers (EMIs) and virtual currency exchanges (VCEs)

The BSP processed eight new nonbank EMIs, two nonbank EMIs with VCE services and three VCEs. Another existing EMI was also granted authority to offer VCE. To date, there is a total of 27 non-bank EMIs and 16 VCEs, four of which offer both EMI and VCE services.

Approval of Social Amelioration Program (SAP) initiative

The BSP facilitated the approval of an initiative spearheaded by the Rural Bankers’ Association of the Philippines (RBAP) in partnership with RCBC to help the government disburse a Social Amelioration Program for 18 million families under the Bayanihan to Heal as One Act. Using RCBC’s digital platforms, over 3,000 touchpoints deployed in rural banks, sari-sari stores and pawnshops nationwide were able to service payouts of the program’s beneficiaries.

The BSP also approved Unionbank of the Philippines’ partnership with the Parañaque City local government to disburse ₱200 million in cash assistance through its BSP-approved e-money product.

THIRD PILLAR:an efficient PayMentS and SettLeMentS SySteM

Digitalization of payments and collection

In line with the objective of the BSP’s Digital Payments Transformation Roadmap to convert 50 percent of the total volume of retail payments in digital form and for 70 percent of Filipino adults to have transaction accounts, the central bank endeavored a widespread adoption of electronic payments to boost economic growth and development. This is in keeping with the strategy to promote safe, efficient and inclusive payment and settlement systems.

The BSP also launched the New Order of Payment System (NOPS) in line with its advocacy to promote digital payments and to provide its clients with accessible payment facilities, especially during the COVID-19 pandemic.

The NOPS is a secure web-based system accessible through the Internet. Through this system, BSP clients can make payments through the following payment channels: over-the-counter facilities, mobile or online banking, and payment gateways (e.g., VISA/Mastercard debit or credit cards).

BSP clients can pay for the following transactions through the NOPS:1. Property amortizations and lease rentals;2. Licensing and registration fees of new banks, pawnshops, and money service businesses;3. Sale of bidding documents and payment of bid securities;4. Sale of BSP corporate items; and5. Other amounts due to the BSP.

Other payment channels such as PESONet, InstaPay, e-money, and others will be available soon.

The BSP’s Asset Management Department clients may also use NOPS to generate their order of payment statements, inquire about their account status, and download official receipts.

The BSP is mandated to ensure the safe, timely, and accurate payment and settlement of financial transactions.

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Provision of relief measure to Philippine Payments and Settlements System (PhilPaSS) participants

The BSP fosters a supportive environment where BSP-supervised entities can extend improved financial intermediation services to Filipinos during the COVID-19 pandemic situation.

As the Philippine economy strives to recover from the severe effects of the coronavirus pandemic, it is critical that financial institutions continue to effectively provide financial services and promote the digitalization of payment services, in tune with the changing economic landscape. For this, the BSP extended a temporary waiver of fees for fund transfer transactions made through PhilPaSS beginning April 1, 2020 until the end of 2020. The measure is intended to provide further support for the efficient operations of financial institutions.

The BSP also encouraged PhilPaSS participants to inform the public about automated clearinghouses and PhilPaSS as facilities to electronically transfer funds. This effort has provided Filipinos with a wide range of digital payment channels.

— BENJAMIN E. DIOKNOAn excerpt from his speech, “Accelerating Digital Transformation in the Covid-19 Era”,

delivered on Nov. 17, 2020

“In times like these, raw strength is important, but equally important is the ability to bend and adapt. Digitalization is part of the new normal, and the rate and speed of how we get used to it will determine our chances of bouncing back and standing tall and strong again.”

Photo taken during the McDonalds and PayMaya QR Payment Launch held on Sept. 18, 2019

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fInancIaL StaBILIty

Publication of the Macroprudential Policy Strategy Framework

The framework reflects how financial authorities define systemic risks, how they monitor changes in risk behaviors, and how they move forward in managing this policy concern.

Implementation of FS interventions

The BSP implemented unconventional tools to boost funding liquidity, which addressed any possible panic source within the financial markets and eased the banks’ pressures in their dealings with the public.

Communication of FS and systemic risk to varied audiences

The active communication of systemic risks exhibited the thought leadership of the BSP Governor. The Financial Stability Policy Committee (FSPC) and the Financial Stability Coordination Council (FSCC) issued press statements informing the public of such risks and what the authorities will do about it.

The FSCC, with the Governor in the lead, also decided to transform the annual Financial Stability Report (FSR) into a semestral FSR. This provided various stakeholders the opportunity to get a timely analysis of new developing risks and be informed of the authorities’ interventions. The FSCC successfully released the 1st and 2nd Semester 2020 FSR on June 23, 2020 and Nov. 18, 2020, respectively.

The BSP also engaged more technical audiences in open discussions on financial stability and systemic risk issues through a series of webinars, press briefings, and virtual conferences. It also engaged netizens to raise awareness about financial stability and systemic risk issues through the BSP and FSCC social media accounts.

The BSP fulfilled its mandate under Republic Act No. 11211 to promote financial stability (FS) and ensure that systemic risks neither escalated nor cascaded, despite complications brought about by the 2020 global health emergency. The particular attention given to the pursuit of financial stability in the BSP Charter is timely, as FS is about mitigating systemic risks and the COVID-19 pandemic is a systemic shock.

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BSP Governor Benjamin E. Diokno during his first meeting as Chairman of the Financial Stability Coordination Council (FSCC) in March 2019. He was joined by Finance Secretary Carlos G. Dominguez (seated 2nd from L), Securities and Exchange Commission (SEC) Chairperson Emilio B. Aquino (seated leftmost), and Philippine Deposit Insurance Corporation (PDIC) President Roberto B. Tan (seated rightmost). Also in the meeting were (standing from L to R) PDIC Senior Vice President Romeo M. Mendoza, Jr., SEC Commissioner Ephyro Luis B. Amatong, Insurance Deputy Commissioner George S. Ongkeko, Jr., Finance Undersecretary Gil S. Beltran, BSP Deputy Governor Chuchi G. Fonacier, National Treasurer Rosalia V. De Leon, SEC Commissioner Antonieta F. Ibe, BSP Assistant Governor Johnny Noe E. Ravalo, Managing Director Mary Jane T. Chiong, Acting Director Eufrocinio M. Bernabe, Jr., and Director Dottie M. Bernas.

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— BENJAMIN E. DIOKNOAn excerpt from his speech, “Public Release of the Macroprudential

Policy Strategy Framework: The Case of the Philippines”,delivered on July 14, 2020

“Ultimately, the goal is to ensure that our financial system works for us and facilitates improvements in the welfare of individuals, from savers to borrowers, to investors and issuers, to intermediaries, to infrastructure operators, and digital service providers.”

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fInancIaL IncLUSIOn

Heightened implementation of the Basic Deposit Account (BDA)

There is a sustained significant uptake of BDAs designed for small savers and newly banked low-income individuals. As of 1st Quarter 2020, the number of depositors with BDAs reached 4.6 million. The BDAs, offered by 121 banks, amounted to ₱4 billion. This uptrend is expected to be sustained with consumers’ increased preference to transact online, given the pandemic-induced physical restrictions.

Promotion of transaction accounts for the payment of workers’ salaries and disbursements

The BSP continued to support the Department of Labor and Employment’s (DOLE) efforts to ensure that the objectives of Labor Advisory No. 26-20 dated 03 August 2020 on the use of transaction accounts for payment of wages and other monetary benefits are fully realized. The DOLE and the BSP jointly conducted regional briefings for employers, labor groups, and civil society organizations to encourage adoption and awareness of using digital payments.

Provision of technical assistance on the Social Amelioration Program (SAP) for low-income Filipino families

The BSP is providing technical assistance to the Department of Social Welfare and Development (DSWD) in the implementation of account-based distribution of the SAP’s second tranche. This has enabled cash assistance distribution to newly opened accounts of more than seven million SAP beneficiaries with six financial service providers.

With the passage of Republic Act No. 11211 that amended the BSP’s charter in February 2019, financial inclusion and its complementary objectives of financial literacy and consumer protection became a key initiative for the central monetary authority.

The amended charter states, “In the attainment of its objectives, the Bangko Sentral shall promote broad and convenient access to high quality financial services and consider the interest of the general public.”

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Enhancement of digital and financial infrastructure

As chair and secretariat of the Financial Inclusion Steering Committee (FISC), the BSP has been coordinating with the Department of Information and Communications Technology (DICT) and the National Telecommunications Commission (NTC) to facilitate the FISC endorsement of the proposed Executive Order (EO) liberalizing access to satellite technology for broadband connectivity. This initiative is envisioned to benefit underserved and unserved communities. The BSP also presented the satellite EO proposal to the Economic Development Cluster (EDC), which unanimously agreed to endorse the EO to the President of the Philippines.

Support for PhilSys (National ID) initiative

The BSP continues to support PhilSys as Chair of the Inter-Agency Committee (IAC) on Use Case, with financial inclusion as the priority use case. In this capacity, the BSP supports the PhilSys Council by steering the creation of necessary policies, guidelines, and standards, particularly toward the effective implementation of electronic Know Your Customer (e-KYC) in the financial sector to promote inclusion. An online forum for PhilSys Project Partners was held on Oct. 9, 2020 to raise awareness of their crucial roles, foster co-ownership, and encourage holistic appreciation of Philsys initiatives. Initial implementation of PhilSys will enable registration for a targeted 9 million household heads by the end of 2020.

Establishment of Credit Risk Database (CRD) for MSMEs

Data collection orientations for 17 participant banks were conducted from October to November 2020. In December 2020, the CRD project implementation team—comprised of the BSP’s CRD project implementation unit and a team of experts from CRD Japan—started collecting data from two participating pioneer banks. The data collection process is expected to be completed by July 2021, and the credit scoring model development will commence in the same month.

The project implementation team is also engaging additional banks, including two universal and commercial banks, on their possible participation in the CRD project.

The BSP reaches out to Filipinos from all walks of life through its public information campaigns.

Implementation of MSME financing advocacy initiatives

With support from the Asian Development Bank, the BSP has initiated the implementation of the Agriculture Value Chain Financing (AVCF) project to capacitate pilot banks to lend to farmers and agri-MSMEs within an established value chain for high-value commodities. Six banks have committed to participate as pilot banks, with one bank already releasing its first loan approval. The next steps in the project include developing loan packages, identifying and onboarding other credit risk mitigation mechanisms such as government guarantees, and holding dialogues with participating banks to clarify credit risk management regulations.

In addition, the BSP is currently exploring a possible partnership to promote the country’s supply chain finance (SCF) market, coordinating with the Cooperative Development Authority in providing capacity building for the Credit Surety Fund (CSF) program, and working with industry associations to streamline financial service providers’ requirements from MSME borrowers.

The BSP also supported the Department of Trade and Industry (DTI) in its e-commerce program for MSMEs (P2M, P2B, B2B) and is currently coordinating with the Small Business Corporation to promote digital payments in implementing its MSME loan programs.

Financial education and consumer protection

In line with its financial education initiatives, the BSP began implementing its Digital Literacy Program (DLP) in 2020 with the ultimate objective of enhancing consumer trust in the digital finance ecosystem and increasing digital financial services usage. DLP Phase 1 promoted the use of e-payments, such as PESONet and InstaPay, during the enhanced community quarantine periods. The ongoing DLP Phase 2 is focused on cyber hygiene, conveying the message that e-safety is everyone’s responsibility. Implemented with support from the United States Agency for International Development’s E-PESO Project, DLP Phases 1 and 2 generated six audio-visual presentations, more than 50 social media assets, and ample media coverage to promote e-safety and scam prevention messages.

The BSP likewise enhanced its complaints handling system with the launch of its chatbot, BSP Online Buddy (BOB). With its 24/7 availability and accessibility via webchat, Facebook Messenger, and SMS facility, BOB provides real-time responses to consumer complaints against BSP-supervised financial institutions. Through BOB and its regular Consumer Assistance Management System, the BSP processed more than 15,000 concerns from the public as of the 3rd Quarter of 2020. Around 15% are related to the mandatory grace period’s implementation and availment of loans under the Bayanihan to Heal and Recover Acts (Bayanihan 1 and 2).

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Operationalization of Strategic Asset Allocation (SAA)

The long-term SAA, approved by the MB in December 2019, was operationalized in 2020. The SAA focused on return enhancement and increased portfolio diversification, allowing the peso to remain stable and strong. Investment in these asset classes provided stable returns and diversification benefits to the BSP’s gross international reserves (GIR) during the pandemic.

MORe MILeStOneS Launch of the BSP Bill auction facility

The passage of Republic Act No. 11211 restored the BSP’s authority to issue debt securities as part of its regular monetary operations. Despite the pandemic, the central monetary authority pursued the facility, crafted its governing rules and regulations, and coordinated with other agencies to deliver on its promise to put in place this additional tool with which the BSP can manage domestic liquidity.

Opening of a government securities (GS) purchase window

Due to uncertainties over the pandemic, there was a loss of buying interest in the GS market as banks and investors preferred to hold on to their cash. The BSP injected liquidity into the system through its opening of a GS purchase window to help the market normalize and for GS trading to resume.

The new BSP Logo

The BSP has introduced a new logo in keeping with the changing times. The new logo features a full-bodied Philippine eagle rendered in gold, taking inspiration from various wildlife photographs of actual Philippine eagles.

The creation of the new logo is consistent with the 2020-2023 BSP Strategy, which focuses on making the BSP more relevant to the Filipino people, as it pursues its mandates in support of a sustainable and inclusive growth of the economy.

The implementation of the new logo will be done in phases, details of which will be announced in early 2021.

Investment in green bonds

The BSP has invested an additional US$200 million in green bonds through the green bond fund managed by the Bank for International Settlements. Aside from providing higher returns and diversification benefits in BSP’s GIR, this investment aims to promote green finance and enhance the environmental sustainability objective of the BSP, which recently became a member of the Network for Greening the Financial System.

Sustainable Finance Framework

The BSP has adopted sustainable central banking as one of its strategic objectives. Through its sustainable finance framework, it commits to embed sustainability principles in key areas of the BSP’s operations to the greatest extent possible.

Sustainable finance, as defined in BSP Circular No. 1085, dated March 19, 2020, is “any form of financial product or service, which integrates environmental, social and governance criteria into business decisions, that supports economic growth and provides lasting benefit for both clients and society while reducing pressures on the environment.” This covers green finance, which funds green economic activities and climate change mitigation and adaptation projects.

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Payment moratorium for BSP properties

Although not statutorily mandated by the R.A. No. 11469, or the “Bayanihan to Heal as One Act,” the BSP suspended the acceptance of installment payments for buyers of BSP properties classified as socialized housing from March 16 to June 30, 2020.

Passage of Anti-Terrorism Act of 2020 (ATA)

Under the BSP Governor’s leadership, the Anti-Money Laundering Council (AMLC)—the country’s financial intelligence unit bolstered the country’s anti-money laundering and counter terrorist financing legal framework by supporting the passage of the ATA. The legislation includes criminal provisions for foreign terrorist fighters and a designation process, according to the requirements of United Nations Security Council Resolution No 1373 and the Financial Action Task Force.

The President signed the ATA into law on July 3, 2020, and the Anti-Terrorism Council adopted the ATA’s Implementing Rules and Regulations on Oct. 14, 2020.

Business Intelligence and Data Analytics (BIDA) program

The BSP partnered with Carnegie Mellon University-Australia (CMU-A) one of the leading institutions in the field of information technology, to implement trailblazing business intelligence and data analytics program to BSP officers and staff. The program aims to strengthen the digital transformation initiatives in pursuit of the BSP’s mandate under the BSP Strategy Map 2022-2023.

The 28-week BIDA program, which started on Sept. 22, 2020, intends to help participants identify opportunities brought about by analytics, machine learning, and artificial intelligence and enable them to find solutions to real-world problems. Participants will have the opportunity to apply their newly acquired knowledge and skills in comprehensive business intelligence, data analytics and technology management to develop and recommend innovations for priority areas under their respective departments and offices.

— BENJAMIN E. DIOKNOThe Philippines Beyond Survival:

Becoming an Economic OutperformerPost-Pandemic delivered on Oct. 27, 2020

“The BSP is keen to help realize all the characteristics of a New Economy in the post-COVID era: stronger, more technologically savvy, and more inclusive.”

When the coronavirus pandemic fades, I expect the Philippines to be an economic champion, outperforming other emerging economies in its class.”

www.bsp.gov.ph