Financial Services Agency
Transcript of Financial Services Agency
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Director Judith E. SungsaiSupervision and Examination Sector
Strengthening the Asian Financial Sector toward Sustainable
and Inclusive Growth
Disclaimer: Opinions/views expressed are those of the presenter and do not necessarily reflect those of the Bangko Sentral ng Pilipinas
Financial Services Agency
ADBI-JFSA Joint ConferenceMarch 8, 2013
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Presentation Outline
• Commentary on Post‐Crisis Regulation of Financial Institutions in Japan (Mr. Toshihide Endo)
• Financial Regulatory Developments and Challenges: The Philippines Case
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Commentary on Post‐Crisis Regulation of Financial Institutions in Japan
• Role of the economic and fiscal sectors in financial stability
• Banking sector policy reforms• Risk management and capital• Market conduct
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• Resolution through enforced cooperation, mergers, takeovers, and nationalization
• Mitigating moral hazard and promotion of good corporate governance
• Deposit Insurance Coverage: Sufficient to avoid bank runs but not as large as to erode discipline on risk‐taking
• Arrangements for coordination and information sharing• Cross‐border issues: Diversity in legal and resolution frameworks, reputational risks, transfer pricing, confidentiality and capital flows
Commentary on Post‐Crisis Regulation of Financial Institutions in Japan
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FINANCIAL REGULATORY DEVELOPMENTS AND CHALLENGESThe Philippines Case
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The Philippine Experience Thus Far
‐
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
PHP Millions
Total Assets Deposit Total Capital
Black Monday
Asian Financial Crisis
GlobalFinancial Crisis
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The Philippine Experience Thus Far
Post‐Asian Crisis86.6% Oil /Energy Crisis
73.0%
Subprime Crisis58.6%
0102030405060708090100
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1,000.0
2,000.0
3,000.0
4,000.0
5,000.0
6,000.0
In Percent (RHS)In PhP Billions (LHS)
Philippine Banking System: LTD RatioFor End‐Years Indicated
Loans, gross (exclusive of IBL and RRP with BSP and Other Banks, LHS)Deposit Liabilities (LHS)LTD Ratio (RHS)
Philippine Banking System: Capital Adequacy Ratio (CAR)
As of End‐Years Indicated and as of end‐June 2012
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500
1,000
1,500
2,000
2,500
050
100150200250300350
2001Q
4
2002Q
3
2003Q2
2004Q1
2004Q4
2005Q3
2006Q2
2007Q
1
2007Q4
2008Q3
2009Q2
2010Q1
2010Q
4
2011Q
3
2012Q
2
2001Q2 = 100
Qualifying Capital (LHS)Risk‐Weighted Assets (RHS)
Banking System: Loan QualityFor End-Periods Indicated
-50.0
100.0150.0200.0250.0300.0350.0
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
End-Nov.1
2
Leve
ls in
PhP
Bill
ions
NPLs Loan Loss Reserves
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Financial Sector Reforms
1990‐1995: Build Market Confidence
1996‐2000: Strengthen Capabilities
2001‐2005: Build Market Architecture
2006‐2010: Deepen Financial Infrastructure
2011‐Present: Create Enabling Environment
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Financial Sector ReformsStructural Reforms
Year Reforms1992 Establishment of Philippine Stock Exchange
Setting up of Capital Market Development Council1993 The New Central Bank Act 1996 Set up of Securities Clearing Corp. of the Philippines
Establishment of Phil. Central Depository2002 Launch of Philpass 2004 Formation of Financial Sector Forum 2005 Launch of Fixed Income Exchange
Set up of Capital Markets Institute of the Philippines 2008 Launch of Public Market Trading Platform 2011 Formation of Capital Market Integrity Corporation 2012 Creation of Financial Stability Coordination Council
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Organizing Financial Stability in the Philippines
• The BSP deliberately takes a Financial Stability view
Financial Stability Coordinating Council
• And this is now extended to include the fiscal policy component of stability
Financial Sector Forum
• This complements our prudential policy mandate for the financial sector
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Financial Sector ReformsPrudential Reforms
Year Reforms1995 Issuance of minimum standards for risk management of
derivativesPassage of Investment House Law
1996 Adoption of comprehensive full disclosure rules1997 Adoption of risk‐based examination approach 1998 Consolidated supervision2000 General Banking law of 2000
Securities Regulation Code2005 Adoption of IAS 2009 Manual of Regulations for Foreign Exchange
Transactions 2012 Governance
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Financial Sector ReformsPrudential Reforms
Circ 2802001 Circ 3602002 Circ 4002003
Circ 5382006 Circ 6392009 Circ 7312011
Basel 1
• Define qualifying capital
• Credit risk charge
Basel 1 Basel 1• Market risk charge
• Credit risk charge
• Market risk charge
U/KBs, TBs, RBs, Coop U/KBs Quasi‐Banks
Basel 2
• Pillar 1• Pillar 3
U/KBs and QBs
Basel 2
• Pillar 2
U/KBs (Conso)
Basel 2
• Pillar 2 for Foreign Bank Branches/Subs
Foreign Banks in PHL
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Ba‐sel 3
2014
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Retail
Trading
Corporate
Off‐B/S
• Corp Gov• Risk Mgt
Bank Level Governance
• Guidelines• New skills
Regulatory Oversight
Some Challenges of Implementation13
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Banks
BASEL III
IFRS
Fin’l MktInfra
GovernanceFSB‐BIS‐OECD Reforms
• Shadow banking
• Cons Protection and Fin’l Literacy
• Leverage
• Conglomerates
Dodd‐Frank
• Different versions for different jurisdictions
• Semblance of harmonization
Sweeping Changes in Simultaneous Fronts14
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FINANCIAL STABILITY
OverarchingPolicy
KeyFoundations
Market Conduct
Risk and Capital
FurtherForward
Fin’l InclusionFin’l EducationConsumer Protection
Capital Market Development
Overarching Policy Framework15
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Strengthening the Asian Financial Sector toward Sustainable
and Inclusive Growth
Financial Services Agency
Director Judith E. SungsaiSupervision and Examination Sector
Disclaimer: Opinions/views expressed are those of the presenter and do not necessarily reflect those of the Bangko Sentral ng Pilipinas