BSP upholds commitment to truth and integrity

MANILA, Philippines — In a time when economic stability hinges on central banks’ policy decisions, the Bangko Sentral ng Pilipinas (BSP) continues to uphold its commitment to truth and transparency in its operations.

BSP Governor Eli Remolona Jr., in an interview with The STAR, said that the central bank is focused on values such as excellence, patriotism, integrity, solidarity and accountability.

“We make sure these values guide our everyday work and decisions at the BSP. We embed them in our strategies and policies and make them cornerstones of institutional activities,” he said.

Economic support

The Philippine central bank has played a significant role in leading the financial sector and the economy through various challenges, the most recent being the COVID-19 pandemic and the spike in inflation due to global supply shocks.

At the height of the global health crisis, the BSP slashed interest rates by a total of 200 basis points in 2020, bringing the benchmark rate to a record low of two percent to help support the economy.

However, as the economy recovered from the pandemic, inflation surged in 2022 and peaked at a multi-year high of 8.7 percent in January 2023. The BSP fired aggressive  rate hikes totaling 450 basis points from May 2022 to October 2023  to quell stubborn inflation.

This brought the target reverse repurchase rate to 6.50 percent, the highest level in 17 years. Due to the BSP’s policy decisions, inflation went down to 3.7 percent in June.

“Standing with the truth in monetary policy means that our monetary policy actions are always founded on reliable and verifiable data,” Remolona said.

“We are also forthcoming in our communications wherever we see risks or uncertainty. These allow us to manage the public’s expectations of the future direction of inflation, growth, or monetary policy,” he said.

Transparency

Amid the pandemic and the fight against inflation, the BSP used forward guidance and other communication tools to inform businesses, bankers and all Filipinos about interest rates, inflation and other monetary issues.

“Our aim is to give them a good guide for making financial and other decisions, especially when it comes to loans, major purchases, and expanding businesses,” the BSP chief said.

The BSP has taken steps to improve its transparency mechanism over the years. In February 2022, the central bank replaced the “Inflation Report” with the “Monetary Policy Report (MPR).”

The MPR includes detailed discussions on the Monetary Board’s assessment of risks surrounding the inflation outlooks. It also offers forward-looking discussions on inflation and other key macroeconomic factors that affect price stability.

“In particular, our recent emphasis on risk-adjusted inflation forecasts provided our stakeholders a clearer view of our thinking on how uncertainty over certain variables could impact inflation,” Remolona said.

Beginning in October 2023, Remolona started to disclose the central bank’s risk-adjusted inflation forecast, which added the probability weighted impact of the different upside and downside risks to inflation outlook.

The BSP also publishes the Highlights of the Monetary Board meeting, where monetary officials discuss the key considerations behind their policy decisions.

“While not as extensive as the minutes of the US Fed, the report does reflect the BSP’s collegial and consensus-based approach to monetary policy decision-making,” Remolona said.

Furthermore, the BSP uses different communication channels, such as social media, which help ensure that messages resonate with diverse audiences, enhancing the central bank’s transparency.

Asked about the BSP’s future direction when it comes to upholding its values regarding monetary policy, the BSP governor said the central bank would keep on enhancing its forward guidance so that banks, businesses, families and individuals can be better guided with financial decisions.

“On announcements of monetary policy and economic statistics, we will work to make them clearer and more timely,” Remolona said.

“The BSP will continue to expand its communications in areas like financial inclusion, digitalization, consumer protection, capital market development and sustainability, which are becoming ever bigger parts of our work,” he said.

Meanwhile, the BSP also prioritizes integrity and good governance inside the central bank’s offices.

“Our legal and HR departments have always investigated credible reports of wrongdoing and taken administrative and other actions if and when wrongdoing is proven,” Remolona said.

In October 2023, the BSP’s Office of the General Counsel started investigating after receiving credible information that employees under two members of the Monetary Board had not been reporting for work but were receiving salaries. The BSP conducted administrative proceedings that were filed in March.

“If (the process) seems slow, that’s because we want to be fair to all concerned and to be sure about our findings and actions. In the end, a fair and credible result is what will strengthen trust and integrity,” Remolona said.

He said that the review process is still ongoing, but some rules and procedures will be tightened to ensure that attendance is properly recorded and that this incident will not happen again.

“We constantly review our procedures—this is just a big one—because trust and integrity are important to the people we serve, our employees and the financial and business communities we work with,” he said.

Accountability

The BSP also upholds transparency on banking regulations through regulatory issuances, regular reports, data releases and continued engagements with supervised institutions and the public.

“The BSP values both banks and their customers as important stakeholders in fulfilling its financial stability mandate. We have required banks to disclose information that would not only better inform consumers when making investment and borrowing decisions but also empower them when choosing their preferred financial service provider,” he said.

For example, banks disclose the real interest rate on their loans. This complements the BSP’s supervision activities and ensures that banks practice good corporate governance, manage risks and adhere to consumer protection principles, he added.

In a separate interview with The STAR, Chamber of Thrift Banks (CTB) president Cecilio San Pedro said transparency and accountability are fundamental to banking operations and customer relationships.

“Thrift banks prioritize these values through clear communication channels, ensuring customers are well-informed about their financial products and maintaining rigorous internal controls,” he said.

He said that CTB-member banks adopt comprehensive disclosure practices, which explain terms, conditions and potential risks associated with financial products to its customers.

Regular audits and compliance checks are also conducted to ensure all operations align with regulatory standards.

San Pedro also said mid-sized banks adhere to a robust ethical code that underscores fairness, integrity and accountability.

“In lending practices, we adhere to responsible lending principles, ensuring credit is extended only to borrowers who meet credit standards and demonstrate the capacity to repay, thereby preventing over-indebtedness and promoting financial stability,” he said.

A culture of ethics

Thrift banks also prioritize customer needs and long-term financial well-being regarding financial product offerings. Ethical considerations are embedded in operations through staff training, strict adherence to regulatory requirements and a robust internal governance framework.

“We adhere to a governance framework that includes a clear separation of duties, a well-defined decision-making process and regular oversight by independent board committees,” San Pedro said.

He noted that leadership plays an important role in upholding these standards by setting a solid example and fostering a culture of ethics and compliance.

“Our leaders are committed to continual improvement in governance practices, often exceeding regulatory requirements to adopt best practices. They also encourage open communication and transparency, ensuring all employees understand and commit to our ethical standards,” he said.