Bankers to government: Keep hands off BSP

Members of the banking community, particularly the foreign financial institutions, want the Philippine government to keep its hands off the Bangko Sentral ng Pilipinas (BSP), the head of a foreign bank unit operating in the country said yesterday.

Standard Chartered Bank Philippines (SCBP) chief executive officer Annemarie Durbin said it is the common view of the international and local banking community that the BSP should be insulated from political pressure.

"From the international community’s point of view, the independence of the BSP from government (intervention) is absolutely critical. It must be completely independent, which is what the IMF (International Monetary Fund) is looking for in all developing economies in the world. The independence reflects their ability to manage monetary policy without being unduly pressured by the government," Durbin said in an exclusive interview with The STAR.

The SCBP executive recalled that when President Arroyo took over from ousted President Joseph Estrada in February, there was a concern among foreign and local bankers that the new administration would replace the incumbent BSP governor who was not even halfway then through his term.

Foreign and local bankers were one in saying that changing the BSP governor along with every change in administration would undermine the independence of the BSP from the government.

Durbin said it has nothing to do with personalities, merely the assurance of stability in monetary policy.

In earlier interviews, Deutsche Bank chairman for Asia Hubert Neiss and the Bankers Association of the Philippines (BAP) expressed similar sentiments.

"The independence of the institution is that important for financial stability. The institution should not suffer. Likewise, the independence of the institution and the personality issue should not be confused," Neiss said.

The Deutsche Bank regional head said the real danger is that confidence will again suffer.

"Markets may then see a danger that the BSP can be used for political purposes. Politicians for example always want low interest rates despite inflationary risks, and if the BSP is not independent it may be bad (for the economy). Therefore BSP independence is important for the confidence in the public’s eye in terms of monetary stability."