BSP to prioritize modernization of Philippine banking sector this year

THE BANGKO SENTRAL ng Pilipinas (BSP) will focus on modernizing the banking industry this year, as well as boosting the regulation and supervision of financial institutions, an official said. 

“In the area of financial supervision, the BSP has identified three priority areas to modernize the Philippine banking system and ensure a sustainable, digital, and inclusive banking future,” BSP Deputy Governor Chuchi G. Fonacier said during a media information session in Tagaytay City over the weekend.

“The BSP upholds our commitment to the implementation of a policy reform agenda that aims to maintain institutional stability and financial sector resilience, ensure a sustainable financial system, and develop analytics and (technological) capabilities,” she added.

According to Ms. Fonacier, the central bank will launch initiatives this year to improve the stability and resilience of BSP-supervised financial institutions (BSFIs).

For one, the central bank is preparing a National Risk Assessment (NRA) report on money laundering terrorism financing for the banking sector, she said. The final report is expected to be released in 2025.

The Philippines has been boosting its efforts to combat dirty money as it seeks to exit out of the Financial Action Task Force’s “gray list” of jurisdictions under increased monitoring for money laundering and terrorism financing risks.

Meanwhile, the BSP will operationalize an enhanced resolution framework for banks as part of its supervisory agenda this year, Ms. Fonacier said.

“(This) will be accompanied by strengthened macro-prudential oversight, and enhanced stress testing, as well as thematic review of key risk areas,” she said.

“As regards to policy issuances, the BSP will work on the adoption of the Basel III capital standards related to credit and operational risks, and issuance of the operational resilience standards for banks,” she said. 

She added that the central bank will continue to collaborate with concerned stakeholders from 2024 to 2029 on the development of a cyber resilience plan for financial services.

SUSTAINABILITYThe BSP will also continue to promote the transparency and comparability of sustainability-related information to help investors in making decisions, Ms. Fonacier said.

“For 2024, the priority is to further strengthen the sustainability-related information architecture to avoid greenwashing risks and protect reputation of the Philippine financial system,” she said.

She said the Philippine Sustainable Finance Taxonomy Guidelines (SFTG) will be rolled out by the Financial Sector Forum late this month or early in February.

“The BSP will also leverage our existing collaborations with financial sector regulators including industry associations, development partners, and other stakeholders, in the advancement of the sustainability agenda,” she said.

A sustainable finance taxonomy serves as a guide for companies, investors, financial institutions, regulators, and consumers to help them make an informed decision on whether to finance, purchase, or monitor an asset, product, project, activity, company or portfolio that is aligned with the sustainability agenda.

In September 2023, the central bank released a consultation paper that assesses the design of the SFTG and proposed three essential criteria that financial institutions and regulators can use to evaluate the environmental sustainability of their economic activity.

The BSP also released its first sustainability report in July last year, which outlines the progress made in advancing the sustainability agenda in the Philippine financial system in 2022.

Meanwhile, the central bank will focus on bolstered analytics and supervisory technology capabilities in 2024 by developing an online supervision platform which can digitalize existing supervisory processes, Ms. Fonacier added.

With this, the Financial Supervision Sector would be more efficient in gathering and assessing data on inherent risks and on the financial system as a whole, she said. 

“We’ll also launch the Fit and Proper system for use of the BSFIs, or FITPRO,” she said, adding that employers from the banks may use this system to conduct background checks with the BSP before hiring personnel or officers.

The BSP will likewise enhance its own data warehouse system, she added. — Keisha B. Ta-asan