BSP pursues reforms to modernize banks in Philippines

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The Bangko Sentral ng Pilipinas (BSP) is pursuing policy reforms to modernize Philippine banks and ensure a sustainable, digital and inclusive banking future.

BSP Deputy Governor Chuchi Fonacier said the regulator is pursuing institutional stability and resilience as well as inclusive and sustainable financial system.

Fonacier said the BSP is bolstering its analytics and supervisory technology capabilities to supervise banks and financial institutions.

She explained that these are the priority areas to modernize the country's banking system via the BSP's Financial Sector Policy Reform Agenda.

Fonacier said the BSP has adopted a principles-based governance framework and has been implementing continuous reform initiatives to strengthen the quality of governance in BSP-supervised financial institutions (BSFIs).

She said the BSP is preparing for the National Risk Assessment on Money Laundering or Terrorist Financing from September 2023 to 2025 and strengthening the financial services cyber resilience plan from 2024 to 2029.

For this year, Fonacier said the regulator is operationalizing an advanced resolution framework and strengthening macroprudential oversight and enhanced stress testing.

She added that the central bank is undertaking a thematic review of key risk areas under the supervisory framework.

Under the regulatory framework, the BSP official said the central bank is finalizing Basel III capital standards for credit and operational risk as well as operational resilience standards.

Last year, Fonacier said the key policy issuance of the BSP included Circular 1164, which amended the regulations on credit exposure limits to a single borrower, giving banks more flexibility in managing their own credit risk pertaining to credit risk transfer arrangements.

With the adoption of the Sustainable Central Banking Act, Fonacier said the framework would guide banks in integrating sustainability principles in their operations, strategies, corporate governance as well as risk management systems.

She added that the strengthening of the sustainability-related information architecture and avoiding 'greenwashing' risks or capitalizing on the growing demand for environmentally sound products is a priority this year to protect the reputation of the Philippine financial system.

She stressed the importance of integrating sustainability in banks' corporate and risk governance, strategy and operations as well as increasing banks' operational resiliency.

Fonancier said there is a need to institute regulatory incentives for accelerated sustainable finance mobilization and promote inclusivity in the sustainability agenda.

She also cited the need to expand digital access points and innovative financial products as well as payment solutions.