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The Core Functions of the BSP
An introduction on the BSP’s role in the economy
ARNEL ADRIAN C. SALVA
Deputy Director | Economic and Financial Learning Office
30-31 March 2022
utline
What we’ll learn today
utline
01 | The BSP’s mandate
Sec. 3, RA 7653 (New Central Bank Act), as amended by RA 11211
02 | The Core functions of the BSP
Price Stability, Financial Stability, and
Efficient Payments & Settlements System
03 | Other functions of the BSP
Issuer of money, Manager of official reserves, Bank of banks,
Official depository and advisor of national government, and
determination of the foreign exchange policy
utline
What we’ll learn today
utline
04 | Priority Messages
05 | Walk-through on the BSP’s online
learning resources
01 | The BSP’s mandate
Sec. 3, RA 7653 (New Central Bank Act), as
amended by RA 11211
“ …primary objective… is to MAINTAIN PRICE STABILITY conducive to a
balanced and sustainable growth of the economy and employment.”
“…shall OVERSEE THE PAYMENT & SETTLEMENT SYSTEMS in the Philippines…
in order to promote sound and prudent practices consistent with the
maintenance of financial stability.”
“…shall PROMOTE FINANCIAL STABILITY...”
“…shall PROMOTE BROAD & CONVENIENT ACCESS TO HIGH QUALITY
FINANCIAL SERVICES & consider the interest of the general public.”
01
PRICE
STABILITY
02
FINANCIAL
STABILITY
03
EFFICIENT
PAYMENTS &
SETTLEMENTS
SYSTEM
through the conduct
of monetary policy
by providing channels
through which funds are
transferred among banks and
other institutions
by managing systemic risks and promoting a secure and reliable banking system by
ensuring the safe and sound operation of banks and other BSP-supervised
financial institutions (BSFIs)
02 | Core Functions of the BSP
01
02
03
Price Stability is achieved through the
conduct of Monetary Policy
01
PRICE
STABILITY
02 | Core Functions of the BSP: Price Stability
What is Price Stability &
Why is it important?
PRICE STABILITY
✓ There is low and stable inflation (rate of change in
the average prices of goods and services).
✓ The average prices of goods and services do not
change substantially over time.
Stable prices preserve purchasing power
and allow consumers and businesses to
make sound economic and financial decisions.
02 | Core Functions of the BSP: Price Stability
How does the BSP promote Price Stability?
Case: Inflationary pressures due to excessive demand
Required action: BSP to slow down inflation by implementing
contractionary monetary policy by raising policy rate
Monetary
Policy
actions by a
central bank
Influences overall demand
Exerts influence on prices
Instruments of
Monetary
Policy
Price of
Money and
Credit
Level of
Money and
Credit
Any change in the BSP’s policy rate takes one to two years before it is fully felt across the economy. The BSP looks at inflation
forecast for the next two years and takes action NOW, if needed, to achieve inflation target.
02 | Core Functions of the
BSP: Price Stability
o Central bank lowers policy rate
o Reduces cost of borrowing
o Increases money supply/liquidity
o Increases spending (demand) or investment to
stimulate the economy (can increase inflation)
o Central bank raises policy rate
o Increases cost of borrowing
o Slows down money supply/liquidity
o Reduces spending (demand) or investment
to slow inflation
EXPANSIONARY CONTRACTIONARY
02 | Core Functions of the BSP: Price Stability
INFLATION
TARGETING
PROCESS
02 | Core Functions of the BSP: Financial Stability
02
FINANCIAL
STABILITY
Managing systemic risks and promoting a secure and
reliable banking system by ensuring the safe and
sound operation of banks and other BSP Supervised
Financial Institutions (BFSIs)
Overview of the Philippine Financial System
02 | Core Functions of the BSP: Financial Stability
Regulated by
SEC, IC, CDA
NBFIs without Quasi-
Banking Functions
Lending Companies Investment Houses
Financing
Companies
Capital Market
Participants
Pre-Need
Companies
Insurance
Companies
Cooperatives
Supervised and Regulated
by the BSP
Banking
Institutions
Universal
Banks
Commercial
Banks
Thrift Banks Rural Banks
Cooperative
Banks
Islamic Banks
Other FIs
Digital Banks
with Quasi-
Banking Functions
Money Service
Businesses
Bank-affiliated Non-
Bank Financial
Institutions
Pawnshops
Non-Stock Savings
and Loans
Associations
Financial Intermediaries
Savers
(have excess funds)
Borrowers
(need funds)
✓ Financial Stability (FS) is about managing
financial system risks so that these risks do
not create negative consequences to the rest
of the economy.
✓ FS is about managing risks that can disrupt
the availability and effective delivery of
financial products and services
Systemic risk management
is crucial to avoid the next crisis
Promoting Financial Stability
FINANCIAL
SYSTEM
How does the BSP conduct financial supervision and regulation
02 | Core Functions of the BSP: Financial Stability
Issuance of rules of
conduct/standard
of operations
Conduct of
examination/regular
investigation
Inquiring into
solvency/liquidity
Risk profiling
✓ safety & soundness of FIs
✓ smooth functioning of
financial markets
✓ protection of interests of
depositors & investors
02 | Core Functions of the BSP: Efficient Payments & Settlements System
03
EFFICIENT
PAYMENTS &
SETTLEMENTS
SYSTEM
Providing channels through which funds are
transferred among banks and other institutions
o includes institutional and infrastructure
arrangements and processes through
which money is transferred from one party to
another
A safe, sound, & efficient payment system is
a critical market infrastructure of a
stable financial system
What is an efficient payments
and settlements system?
o provides channels through which funds are
transferred to discharge payment obligations
arising from economic and financial
transactions (includes digital transactions
such as use of online facility and electronic
wallet)
RA No. 11127 or “The National Payment Systems Act” (NPSA)
Provide a policy and regulatory framework, also known as the
National Retail Payment System or NRPS, to establish safe,
efficient, and reliable retail payment system in the country.
Provide the necessary infrastructure through the
operations of the Philippine Payments and Settlements
System or the “PhilPaSS.”
02 | Core Functions of the BSP: Efficient Payments & Settlements System
How does the BSP take the lead in promoting an efficient payments & settlements system?
OVERSEER, REGULATOR, & SUPERVISOR
OF PAYMENT SYSTEMS
OWNER & OPERATOR OF REAL TIME
GROSS SETTLEMENT SYSTEM
ISSUER OF MONEY
Only the BSP can issue legal tender
MANAGER OF OFFICIAL RESERVES
The BSP manages the country’s GIR
BANK OF BANKS/LENDER OF
LAST RESORT
The BSP transacts with banks only,
and gives loans when warranted
OFFICIAL DEPOSITORY AND ADVISOR OF
NATIONAL GOVERNMENT
The NG maintains deposits with the BSP, while the BSP
advises the NG on borrowings
DETERMINATION OF THE
EXCHANGE RATE POLICY
BSP is in charge of the
exchange rate policy
03 | Other Functions of the BSP
Priority Messages | Financial Inclusion
National Strategy for Financial Inclusion (NSFI) 2022-2028
Financial inclusion is a state in which everyone, especially the vulnerable sectors, has effective access to a wide range of financial services.
The new NSFI will serve as a six-year blueprint to achieve the vision of driving financial
inclusion toward broad-based growth and financial resilience.
Source: 2019 FIS Topline Report
Cash-heavy Cash-lite
As of Q4 2020
34.7
million
Active electronic
money accounts
20.1%
Share of digital payments
against the total volume
of financial transactions in
the country
93%
17.9 million in 2019
Target by 2023
70%
Minimum number of
Filipino adults with
financial accounts
50%
Share of digital payments
against the total volume
of financial transactions
in the country
More efficient
payments processing
Faster capital
turnaround and
income growth
Accessibility of financial products
and services to more people,
including low-income earners and
those in the countryside
Financial inclusion
New Order of
Payment
System (NOPS)
Priority Messages | Digital Payments Transformation
Digital Payments Transformation Roadmap (DPTR) 2020-2023
The BSP's Sustainable Central Banking Program
• one of BSP's 2020-2023 strategic priorities
• aims to integrate environmentally responsible and
sustainable policies and work practices within the BSP
• encourage the financial industry to invest in activities that will
promote climate-resilient, green, and sustainable growth
Enable
The BSP promotes a policy environment that supports the adoption and
growth of sustainable finance
Mobilize
The BSP will lead and influence financial institutions to carry out environmentally
and socially responsible business decisions and adopt green practices.
Do The BSP invested in the green bond fund of the Bank for International
Settlements (BIS) in line with its sustainable investment strategy
It also formed a bank-wide technical working group (TWG) that would conduct
vulnerability assessment to determine the impact of climate change to the BSP
offices and branches.
Priority Messages | Sustainable Central Banking
Exchange unused coins in banks.
Place banknotes inside proper
wallets or containers.
Place coins inside proper coin
purses or containers.
Keep banknotes and coins clean. Use banknotes and coins as
payment for goods and services.
Clean Note and Coin Policy Coin Recirculation Program
Priority Messages | Proper Handling of Banknotes and Coins
We can all help in preserving the integrity of our currency
• Phishing emails usually contain wrong
spelling and grammar
• It also uses personal email addresses
and unofficial URLs.
• Check if the website URL has an "S" to
ensure that it is safe
(https:///www.website.com)
• Verify the identity and legitimacy of
individuals or institutions that request
for personal and account information,
donations, investments or payments.
• Lengthen and use special characters in
your password to make it harder to
guess.
• Use different passwords for different
accounts and change it frequently.
Check Emails, Texts and Websites Do Background Checks Use Strong Passwords
Priority Messages | Cyber Hygiene in Digital Transactions
• Do not divulge your account numbers,
log-in credentials, MPIN, OTP, and CVV
code to others
• Immediately ask your bank or financial
institution for help.
• Report suspicious emails from fake
websites, impostors or suspicious
documents and transactions to
regulatory authorities such as the BSP.
• Make use of security questions, mobile
pin (MPIN), one-time-pin (OTP), or
texts and email notifications for all your
accounts as an additional layer of
security when logging-in or confirming
financial transactions
Legal financial
institutions
will NOT ask
for personal
and sensitive
information
Use Multi-Factor Authentication Maintain Information on Personal
Accounts Private
Report Suspicious
Communications, Personnel or
Transactions to the Authorities
Priority Messages | Cyber Hygiene in Digital Transactions
KEY TAKE-AWAYS
To help promote financial stability and a secure and
reliable banking system, the BSP manages systemic
risks and ensures the safe and sound operation of
banks and other BSFIs.
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.
To ensure safe and efficient payments and settlements
of financial transactions, the BSP provides the policy
and regulatory framework and infrastructure essential
to the effective functioning of financial systems.
THE ECONOMY AS A WHOLE BENEFITS
Consumers directly benefit.
Depositors, borrowers, and other
financial system players directly
benefit.
Transacting parties directly benefit.
WHO
BENEFITS
Walk-through on the
BSP’s online learning
resources
www.bsp.gov.ph
Thank you &
Stay safe!
Website: http://www.bsp.gov.ph
Email: BSPEFLO@bsp.gov.ph
Like and follow us on
@PisoLit

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The Core Functions of the Bangko Sentral ng Pilipinas

  • 1. The Core Functions of the BSP An introduction on the BSP’s role in the economy ARNEL ADRIAN C. SALVA Deputy Director | Economic and Financial Learning Office 30-31 March 2022
  • 2. utline What we’ll learn today utline 01 | The BSP’s mandate Sec. 3, RA 7653 (New Central Bank Act), as amended by RA 11211 02 | The Core functions of the BSP Price Stability, Financial Stability, and Efficient Payments & Settlements System 03 | Other functions of the BSP Issuer of money, Manager of official reserves, Bank of banks, Official depository and advisor of national government, and determination of the foreign exchange policy
  • 3. utline What we’ll learn today utline 04 | Priority Messages 05 | Walk-through on the BSP’s online learning resources
  • 4. 01 | The BSP’s mandate Sec. 3, RA 7653 (New Central Bank Act), as amended by RA 11211 “ …primary objective… is to MAINTAIN PRICE STABILITY conducive to a balanced and sustainable growth of the economy and employment.” “…shall OVERSEE THE PAYMENT & SETTLEMENT SYSTEMS in the Philippines… in order to promote sound and prudent practices consistent with the maintenance of financial stability.” “…shall PROMOTE FINANCIAL STABILITY...” “…shall PROMOTE BROAD & CONVENIENT ACCESS TO HIGH QUALITY FINANCIAL SERVICES & consider the interest of the general public.”
  • 5. 01 PRICE STABILITY 02 FINANCIAL STABILITY 03 EFFICIENT PAYMENTS & SETTLEMENTS SYSTEM through the conduct of monetary policy by providing channels through which funds are transferred among banks and other institutions by managing systemic risks and promoting a secure and reliable banking system by ensuring the safe and sound operation of banks and other BSP-supervised financial institutions (BSFIs) 02 | Core Functions of the BSP 01 02 03
  • 6. Price Stability is achieved through the conduct of Monetary Policy 01 PRICE STABILITY 02 | Core Functions of the BSP: Price Stability
  • 7. What is Price Stability & Why is it important? PRICE STABILITY ✓ There is low and stable inflation (rate of change in the average prices of goods and services). ✓ The average prices of goods and services do not change substantially over time. Stable prices preserve purchasing power and allow consumers and businesses to make sound economic and financial decisions. 02 | Core Functions of the BSP: Price Stability
  • 8. How does the BSP promote Price Stability? Case: Inflationary pressures due to excessive demand Required action: BSP to slow down inflation by implementing contractionary monetary policy by raising policy rate Monetary Policy actions by a central bank Influences overall demand Exerts influence on prices Instruments of Monetary Policy Price of Money and Credit Level of Money and Credit Any change in the BSP’s policy rate takes one to two years before it is fully felt across the economy. The BSP looks at inflation forecast for the next two years and takes action NOW, if needed, to achieve inflation target. 02 | Core Functions of the BSP: Price Stability
  • 9. o Central bank lowers policy rate o Reduces cost of borrowing o Increases money supply/liquidity o Increases spending (demand) or investment to stimulate the economy (can increase inflation) o Central bank raises policy rate o Increases cost of borrowing o Slows down money supply/liquidity o Reduces spending (demand) or investment to slow inflation EXPANSIONARY CONTRACTIONARY 02 | Core Functions of the BSP: Price Stability
  • 11. 02 | Core Functions of the BSP: Financial Stability 02 FINANCIAL STABILITY Managing systemic risks and promoting a secure and reliable banking system by ensuring the safe and sound operation of banks and other BSP Supervised Financial Institutions (BFSIs)
  • 12. Overview of the Philippine Financial System 02 | Core Functions of the BSP: Financial Stability Regulated by SEC, IC, CDA NBFIs without Quasi- Banking Functions Lending Companies Investment Houses Financing Companies Capital Market Participants Pre-Need Companies Insurance Companies Cooperatives Supervised and Regulated by the BSP Banking Institutions Universal Banks Commercial Banks Thrift Banks Rural Banks Cooperative Banks Islamic Banks Other FIs Digital Banks with Quasi- Banking Functions Money Service Businesses Bank-affiliated Non- Bank Financial Institutions Pawnshops Non-Stock Savings and Loans Associations Financial Intermediaries Savers (have excess funds) Borrowers (need funds)
  • 13. ✓ Financial Stability (FS) is about managing financial system risks so that these risks do not create negative consequences to the rest of the economy. ✓ FS is about managing risks that can disrupt the availability and effective delivery of financial products and services Systemic risk management is crucial to avoid the next crisis Promoting Financial Stability FINANCIAL SYSTEM
  • 14. How does the BSP conduct financial supervision and regulation 02 | Core Functions of the BSP: Financial Stability Issuance of rules of conduct/standard of operations Conduct of examination/regular investigation Inquiring into solvency/liquidity Risk profiling ✓ safety & soundness of FIs ✓ smooth functioning of financial markets ✓ protection of interests of depositors & investors
  • 15. 02 | Core Functions of the BSP: Efficient Payments & Settlements System 03 EFFICIENT PAYMENTS & SETTLEMENTS SYSTEM Providing channels through which funds are transferred among banks and other institutions
  • 16. o includes institutional and infrastructure arrangements and processes through which money is transferred from one party to another A safe, sound, & efficient payment system is a critical market infrastructure of a stable financial system What is an efficient payments and settlements system? o provides channels through which funds are transferred to discharge payment obligations arising from economic and financial transactions (includes digital transactions such as use of online facility and electronic wallet)
  • 17. RA No. 11127 or “The National Payment Systems Act” (NPSA) Provide a policy and regulatory framework, also known as the National Retail Payment System or NRPS, to establish safe, efficient, and reliable retail payment system in the country. Provide the necessary infrastructure through the operations of the Philippine Payments and Settlements System or the “PhilPaSS.” 02 | Core Functions of the BSP: Efficient Payments & Settlements System How does the BSP take the lead in promoting an efficient payments & settlements system? OVERSEER, REGULATOR, & SUPERVISOR OF PAYMENT SYSTEMS OWNER & OPERATOR OF REAL TIME GROSS SETTLEMENT SYSTEM
  • 18. ISSUER OF MONEY Only the BSP can issue legal tender MANAGER OF OFFICIAL RESERVES The BSP manages the country’s GIR BANK OF BANKS/LENDER OF LAST RESORT The BSP transacts with banks only, and gives loans when warranted OFFICIAL DEPOSITORY AND ADVISOR OF NATIONAL GOVERNMENT The NG maintains deposits with the BSP, while the BSP advises the NG on borrowings DETERMINATION OF THE EXCHANGE RATE POLICY BSP is in charge of the exchange rate policy 03 | Other Functions of the BSP
  • 19. Priority Messages | Financial Inclusion National Strategy for Financial Inclusion (NSFI) 2022-2028 Financial inclusion is a state in which everyone, especially the vulnerable sectors, has effective access to a wide range of financial services. The new NSFI will serve as a six-year blueprint to achieve the vision of driving financial inclusion toward broad-based growth and financial resilience. Source: 2019 FIS Topline Report
  • 20. Cash-heavy Cash-lite As of Q4 2020 34.7 million Active electronic money accounts 20.1% Share of digital payments against the total volume of financial transactions in the country 93% 17.9 million in 2019 Target by 2023 70% Minimum number of Filipino adults with financial accounts 50% Share of digital payments against the total volume of financial transactions in the country More efficient payments processing Faster capital turnaround and income growth Accessibility of financial products and services to more people, including low-income earners and those in the countryside Financial inclusion New Order of Payment System (NOPS) Priority Messages | Digital Payments Transformation Digital Payments Transformation Roadmap (DPTR) 2020-2023
  • 21. The BSP's Sustainable Central Banking Program • one of BSP's 2020-2023 strategic priorities • aims to integrate environmentally responsible and sustainable policies and work practices within the BSP • encourage the financial industry to invest in activities that will promote climate-resilient, green, and sustainable growth Enable The BSP promotes a policy environment that supports the adoption and growth of sustainable finance Mobilize The BSP will lead and influence financial institutions to carry out environmentally and socially responsible business decisions and adopt green practices. Do The BSP invested in the green bond fund of the Bank for International Settlements (BIS) in line with its sustainable investment strategy It also formed a bank-wide technical working group (TWG) that would conduct vulnerability assessment to determine the impact of climate change to the BSP offices and branches. Priority Messages | Sustainable Central Banking
  • 22. Exchange unused coins in banks. Place banknotes inside proper wallets or containers. Place coins inside proper coin purses or containers. Keep banknotes and coins clean. Use banknotes and coins as payment for goods and services. Clean Note and Coin Policy Coin Recirculation Program Priority Messages | Proper Handling of Banknotes and Coins We can all help in preserving the integrity of our currency
  • 23. • Phishing emails usually contain wrong spelling and grammar • It also uses personal email addresses and unofficial URLs. • Check if the website URL has an "S" to ensure that it is safe (https:///www.website.com) • Verify the identity and legitimacy of individuals or institutions that request for personal and account information, donations, investments or payments. • Lengthen and use special characters in your password to make it harder to guess. • Use different passwords for different accounts and change it frequently. Check Emails, Texts and Websites Do Background Checks Use Strong Passwords Priority Messages | Cyber Hygiene in Digital Transactions
  • 24. • Do not divulge your account numbers, log-in credentials, MPIN, OTP, and CVV code to others • Immediately ask your bank or financial institution for help. • Report suspicious emails from fake websites, impostors or suspicious documents and transactions to regulatory authorities such as the BSP. • Make use of security questions, mobile pin (MPIN), one-time-pin (OTP), or texts and email notifications for all your accounts as an additional layer of security when logging-in or confirming financial transactions Legal financial institutions will NOT ask for personal and sensitive information Use Multi-Factor Authentication Maintain Information on Personal Accounts Private Report Suspicious Communications, Personnel or Transactions to the Authorities Priority Messages | Cyber Hygiene in Digital Transactions
  • 25. KEY TAKE-AWAYS To help promote financial stability and a secure and reliable banking system, the BSP manages systemic risks and ensures the safe and sound operation of banks and other BSFIs. 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. To ensure safe and efficient payments and settlements of financial transactions, the BSP provides the policy and regulatory framework and infrastructure essential to the effective functioning of financial systems. THE ECONOMY AS A WHOLE BENEFITS Consumers directly benefit. Depositors, borrowers, and other financial system players directly benefit. Transacting parties directly benefit. WHO BENEFITS
  • 26. Walk-through on the BSP’s online learning resources www.bsp.gov.ph
  • 27. Thank you & Stay safe! Website: http://www.bsp.gov.ph Email: BSPEFLO@bsp.gov.ph Like and follow us on @PisoLit