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Duterte okays central bank reforms

(Photo from Bangko Sentral ng Pilipinas Facebook)

Money service businesses, credit granting businesses and payment system operators will now be under the supervision of the Bangko Sentral ng Pilipinas (BSP) with President Rodrigo R. Duterte signing Republic Act (RA) No. 11211.

“This puts the BSP in a strategic position to address potential risks arising from the linkages of banks and these financial entities,” central bank Governor Nestor A. Espenilla, Jr. said following the signing of the measure.

The new law, which amends the New Central Bank Act, increases BSP’s capitalization to P200 billion from the current P50 billion. This will be sourced from the dividends declared by the BSP in favor of the national government.

Espenilla described the amendments as “timely and attuned to a fast-evolving market landscape.” He said these will boost the BSP’s capability to promote the stability of prices and the financial system.

Under the new BSP charter, the central bank is also exempt from income tax derived from its governmental functions.

The new law also removes money supply and credit levels as basis for determining monetary policy. The focus on these indicators has declined among the central banks over the years, as fastening price stability now considers a broader set of indicators.

The law also restores the central bank’s authority to issue debt papers as part of its regular operation. This gives the BSP greater flexibility in determining the timing and size of its monetary operations.

Under the inflation targeting framework, the BSP focuses mainly on activating price stability instead of targeting monetary aggregates , as the ultimate objective of monetary policy.

Espenilla said these reforms further align BSP’s operations with global best practices, improve the BSP’s corporate viability and enhance its capacity for crafting proactive policies amid rising interlinkages in the financial markets and the broader economy.

“These reforms place the BSP in a stronger position to pursue its price and financial stability mandate amidst growing economy and the increasing sophistication of the financial system,” Espenilla said. (Ventures Cebu/PR)

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