“What Do You Know About the BSP?

”
The Role of the BSP in the Economy
BSP’s Mandate
Section 3 RA No. 7653 (New Central Bank Act)
As amended by RA No. 11211

“ …primary objective is to maintain price

stability conducive to a balanced and
sustainable growth of the economy and
employment.”

“…shall promote financial stability… shall oversee the

payment and settlement systems in the Philippines…
in order to promote sound and prudent practices
consistent with the maintenance of financial
stability.”

“…shall promote broad and convenient access to

high quality financial services and consider the
interest of the general public.”
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 The BSP : Guardian of price stability

BSP’s Mandate
Section 3 RA No. 11211
(New Central Bank Act, And For
Other Purposes)

“ …primary objective is to maintain

price stability conducive to a
balanced and sustainable economic
growth and employment…”

supervision over the operations of

“…shall have
banks and exercise such regulatory powers… over
the operations of finance companies, non-bank financial
institutions performing quasi-banking functions, or quasi-
banks and institutions performing similar functions…”

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3 Pillars of Central Banking

Price stability through

the conduct of monetary policy

Financial stability through

banking supervision and regulation

Efficient payment and

settlement systems by providing
channels through which funds are
transferred among banks and other
institutions
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 1st Pillar: Price stability

Price stability
• On average, prices
neither increase
nor decrease
markedly
• There is low and
stable inflation

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 Why is price stability important?
Impact of extraordinarily high inflation on the economy
2008: Hyperinflation in
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Zimbabwe
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1946: Hyperinflation in
Hungary
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1923: Hyperinflation in
Germany

2018: Hyperinflation in
Venezuela

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 AVP
Price Level and Inflation
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 What causes inflation?
Types of inflation
Cost-push
• Due to increase in cost of production and other
supply factors
• Outside the influence of BSP
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 What causes inflation?
Types of inflation
Demand-pull
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• Due to excess demand

relative to supply of goods
and services (e.g., increase
in money supply)
• BSP exerts influence over
money supply and thus can
also influence inflation

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 What is monetary policy?

How monetary policy works:

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How does the BSP’s monetary policy work?

Case: Inflationary pressures due to excessive demand
Required action: BSP to slow down inflation by implementing contractionary monetary policy

The BSP Banks’ Investment

INCREASES interest growth will be
policy slower Aggregate
rates will Higher cost of
interest demand
follow the borrowing
Rate (RRP) growth will
increase Consumption
be slower
growth will be
slower

LOWER
INFLATION
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A safe, sound, and efficient payment system

critical market infrastructure of a stable
financial system 11
 What is monetary policy?
Availability DEMAND
BSP and cost of
MONEY
for goods
and services
Inflation

Monetary
Policy Instruments
Reverse repurchase facility
Actions by a
•
central bank to • Term deposit facility
manage the • Overnight liquidity facilities
availability and • Rediscounting facility
cost of money and • Reserve requirements
credit to attain
stable prices
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What is the BSP’s monetary policy framework?

Inflation targeting
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Involves publicly
announcing an inflation
target which the BSP
promises to achieve over
a certain period

Inflation targets for 2018-2020 : 3.0% ± 1.0 ppt (2.0% – 4.0%)

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3 Pillars of Central Banking

Price stability through

the conduct of monetary policy

Financial stability through

banking supervision and regulation

Efficient payment and

settlement systems by
providing channels through which
funds are transferred among banks
and other institutions
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 2nd Pillar: Financial Stability
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Promoting financial stability through banking

supervision and regulation
INDIRECT FINANCE
Financial FUNDS
FUNDS
Intermediaries

FUNDS
Lenders- Borrowers-
Savers FUNDS Financial FUNDS Spenders
Households Markets Households
Firms DIRECT FINANCE Firms
Government Government
Channels of Funds

Financial stability – operations of banks and other financial

institutions are sound and stable while remaining supportive of
the country’s economic growth 15
 2nd Pillar: Financial Stability
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Supervision shall include:

Issuance of rules of conduct/ establishment of

standards of operations
Conduct of examination
Risk profiling
Regular investigation
Inquiring into solvency/liquidity
Enforcing prompt corrective action

Sec. 4, RA No. 8791, The General Banking Law of 2000 and Circular No.
523 dated 23 March 2006)

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 Overview of the Philippine
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Banking Institutions

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3 Pillars of Central Banking

Price stability through

the conduct of monetary policy

Financial stability through

banking supervision and regulation

Efficient payment and

settlement systems by
providing channels through which
funds are transferred among banks
and other institutions
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 3rd Pillar: Efficient Payment and
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Settlement Systems
The BSP takes the lead in promoting an efficient
payments and settlements system by providing:

policy and regulatory framework, also known as

the National Retail Payment System (NRPS) to
establish safe, efficient and reliable retail
payment system in the country

necessary infrastructure through the operations

of the Philippine Real Time Gross Settlement
System or the “PhilPaSS”
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 3rd Pillar: Efficient Payment and
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Settlement Systems
Efficient payment and settlement systems
essential to the effective functioning of financial
systems worldwide

provide channels through which funds are transferred
among banks and other institutions to discharge
payment obligations arising from economic and
financial transactions across the entire economy

reduces the cost of exchanging goods and services

an essential tool for the effective implementation of
monetary policy, and the smooth functioning of
money and capital markets. 20
 3rd Pillar: Efficient Payment and
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Settlement Systems
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 3rd Pillar: Efficient Payment and
Settlement Systems
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 3rd Pillar: Efficient Payment and
Settlement Systems
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 3rd Pillar: Efficient Payment and
Settlement Systems

BSP -
• is the owner and operator of
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the Philippine Payments and

Settlements System (PhilPaSS), a
real-time gross settlement system
where settlement is done thru the
member-bank’s demand deposit
account maintained by the BSP

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 3rd Pillar: Efficient Payment and
Settlement Systems
PhilPaSS Transactions

Remittance of BIR High-value

Interbank Settlement of OF
and BOC customer
lending/borrowing remittances
taxes/duties payments

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Settlement of
Settlement of ATM
checks clearing PhilPaSS transactions
operations

Government Foreign currency

Securities trading BSP’s open market trading
operations

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OTHER KEY BSP FUNCTIONS
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Issuer of money

Bank of banks and lender of last

resort

Custodian of official reserves The picture can't be displayed.

Exchange rate policy maker

Banker, financial advisor, and

official depository of the
Government
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Key points

To preserve purchasing power, the BSP’s main objective is to
maintain price stability. It uses inflation targeting as a
framework for conducting monetary policy. Consumers
directly benefit.

To help promote financial stability, the BSP supervises and

regulates banks and other financial institutions. Depositors
and borrowers directly benefit.

To ensure safe and efficient payments and settlements of

financial transactions, the BSP provides policy and regulatory
framework and infrastructure essential to the effective
functioning of financial systems . Transacting parties directly
benefit.
THE ECONOMY AS A WHOLE BENEFITS.
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 Thank you.

Website : http://www.bsp.gov.ph
Email : bspmail@bsp.gov.ph