The important role the Bangko Sentral ng Pilipinas (BSP) plays in the economy is beyond dispute.
The law provides for the creation of a central monetary authority that shall function and operate as an independent and accountable body corporate in the discharge of its mandated responsibilities concerning money, banking and credit.
Under Republic Act no. 7653, the BSP shall provide policy directions in the areas of money, banking and credit and shall have supervision over the operations of banks. Its primary objective is to maintain price stability conducive to a balanced and sustainable growth of the economy and shall also promote and maintain monetary stability and the convertibility of the peso.
The powers and functions of the BSP shall be exercised by the Monetary Board, the chairman of which shall be the governor of the BSP. Five members of the MB shall come from the private sector, all of whom shall serve full-time, while the sixth member shall be a member of the Cabinet to be designated by the President. The members of the BSP shall serve for a term of six years.
The governor of the BSP shall be its chief executive, whose powers and duties under the law include executing and administering the policies and measures approved by the Monetary Board, and directing and supervising the operations and internal administration of the BSP.
As part of its primary functions, the BSP shall have supervision over, and conduct examinations of banks and quasi-banks, including their subsidiaries and affiliates engaged in allied activities.
It also has the sole power and authority to issue currency, the responsibility of preserving the international value of the peso and to maintain its convertibility into other currencies as well as to maintain international reserves, the power to engage in open market purchases and sale of securities to achieve price stability, among others.
All these, I’m discussing just to emphasize the fact that the President must choose wisely when he decides who shall replace outgoing BSP Governor Amando Tetangco Jr. whose term expires in July.
Tetangco is said to have been offered to stay on for an unprecedented third term by President Duterte, but the law has not been amended to allow for such. Indeed, whoever will succeed Tetangco has big shoes to fill. He is not a multi-awarded central bank governor for nothing and the international financial community has taken notice of this fact.
A number of names have been floated as to Tetangco’s possible replacement, some BSP insiders and the others, outsiders.
Among the insiders are Deputy Governors Diwa Guinigundo and Nestor Espenilla, one of who is said to have the support of Finance Secretary Carlos Dominguez.
President Duterte has said Dominguez has a lot of say on the choice of the next BSP chief executive.
The public is more familiar with Guinigundo, who is often asked to explain the central bank’s position or reaction to economic news or to elaborate on the BSP’s policy pronouncements. He is in charge of economic analysis and research at the BSP.
Espenilla, on the other hand, is said to be more concerned with regulatory matters, including those affecting banks. According to observers, he and his office may be low key, but his work has had more impact on the country’s fiscal position.
Being in charge of bank regulations, Espenilla is said to have helped strengthen the Philippine banking system to what it is today. Espenilla institutionalized the National Retail Payment System (NRPS) project and has pushed for a more inclusive banking system. This allowed micro, small and medium enterprises (MSMEs) and low-income individuals to avail of a broad array of financial services in unbanked and underbanked rural areas, through a balanced regulatory approach.
Tetangco once said his successor should have a good understanding of what he is supposed to do as mandated by the BSP charter.
He emphasized that as head of the BSP, one must be familiar with the latter’s primary objectives which would be maintenance of price and financial stability conducive to a balanced and sustainable growth of the economy. In addition, his successor must be patient as there would be many challenges.
The outgoing BSP chief executive revealed he prefers an insider as his replacement, one with central banking experience, to ensure a seamless transition.
Others in the running are former trade and industry chief and ex-Monetary Board member Peter Favila and East West Bank vice-chairman and former president Antonio Moncupa Jr., who has the support of the ruling party PDP-Laban and heads the latter’s policy think-tank – the PDP Laban Research Planning and Development Institute.
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