Julia Christine Botin

Article (news)

Raine Musñgi

ABS-CBN News

MANILA — For much of President Ferdinand Marcos Jr.&#x27;s administration, the Bangko Sentral ng Pilipinas (BSP) has been judged by a single number: inflation.From post-pandemic supply disruptions and soaring food prices to geopolitical conflicts that drove up global oil and fertilizer costs, the central bank spent much of the past four years trying to restore price stability while keeping the economy on a sustainable growth path. More recently, renewed Middle East tensions and slowing global growth have again complicated that balancing act, prompting the BSP to resume tightening monetary policy and warn that upside inflation risks remain.Yet listening to BSP Governor Eli Remolona Jr., it is striking that the institution&#x27;s next priorities extend well beyond inflation and interest rates.In a wide-ranging interview on ANC&#x27;s Banker After Dark, Remolona spent as much time discussing payment systems, bank supervision, financial markets and public confidence as he did monetary policy itself.His message: the BSP&#x27;s next mission is not simply to respond to crises, it is to build a financial system capable of absorbing them.&quot;Fundamentally, central banking is about stability: price stability, financial stability, and payments stability,&quot; Remolona said. &quot;All these things work together.&quot; That philosophy marks an important evolution in how the BSP sees its role.If the first half of the Marcos administration was defined by fighting inflation, the second appears increasingly focused on strengthening the institutions that support long-term economic resilience.<div><iframe width="640" height="360" src="https://www.youtube.com/embed/wkFII0tBPcc?&amp;wmode=opaque&amp;rel=0" frameBorder="0" allowfullscreen="" class="fr-draggable"></iframe> </div><div>The battle beyond inflation</div>Inflation remains the BSP&#x27;s primary mandate, but Remolona argues that what matters most today is not simply where inflation is headed, but whether Filipinos continue believing the central bank can bring it back to target.&quot;Our legacy of high inflation still affects the way we behave today,&quot; he said, referring to the lasting influence of past inflation episodes on household and business expectations.That legacy explains why the BSP views monetary policy as more than adjusting borrowing costs.&quot;You don&#x27;t just move the policy rate to reduce inflation,&quot; Remolona said. &quot;You also move the policy rate to influence expectations.&quot;Then came the interview&#x27;s most candid admission.&quot;It&#x27;s one of the things that keeps me awake at night,&quot; he said. &quot;The possibility that our inflation expectations will de-anchor... then it becomes much harder to manage inflation.&quot;Those remarks come as economists increasingly argue that credibility -- not merely the level of interest rates -- will determine how effectively the BSP navigates the next wave of global inflation risks.Former BSP Deputy Governor Diwa Guinigundo recently made a similar point, saying the central bank&#x27;s most important task is to demonstrate an unwavering commitment to restoring price stability so that households, businesses and financial markets remain confident inflation will eventually return to target.In other words, credibility has become monetary policy&#x27;s most valuable asset.<div>From protecting banks to protecting the system</div>The same shift in thinking is reshaping how the BSP regulates banks.Rather than treating every institution alike, Remolona said supervision is increasingly concentrated on banks whose failure could threaten the broader financial system.&quot;These days, when we regulate banks, it&#x27;s not so much to protect the individual banks,&quot; he said. &quot;Now it&#x27;s about protecting the system as a whole.&quot;The BSP now places greater emphasis on systemically important banks -- institutions whose size, interconnectedness and role in financial markets make them critical to overall stability.&quot;Our newer regulations are focused on the bigger... systemically important banks,&quot; Remolona said. &quot;The banks for which if they somehow fail, it will affect the system as a whole.&quot;That approach reflects one of the defining lessons from the 2008 Global Financial Crisis: regulators cannot wait until individual banks fail before acting. Instead, they must identify vulnerabilities early enough to prevent broader contagion.The philosophy now extends well beyond capital requirements.Earlier this year, the BSP convened its inaugural Corporate Governance Summit, urging bank directors to strengthen governance, transparency, cyber resilience and board oversight amid growing financial and geopolitical risks.&quot;Our regulations on capital, liquidity, and transparency are there not just to protect you as individual banks,&quot; Remolona told bank executives during the summit. &quot;They are really about maintaining the stability of the whole financial system.&quot;The same preventive approach is evident in consumer protection.New BSP rules requiring banks and electronic money issuers to reimburse victims of unauthorized online transactions under defined circumstances shift greater responsibility to financial institutions to strengthen fraud controls, cybersecurity and operational resilience. Rather than merely resolving disputes after losses occur, the reforms aim to preserve public confidence in digital finance as online transactions continue to expand.<div><iframe width="640" height="360" src="https://www.youtube.com/embed/6q1htLlNHkw?&amp;wmode=opaque&amp;rel=0" frameBorder="0" allowfullscreen="" class="fr-draggable"></iframe> </div>The transition, however, is far from complete.Last month, Fitch Ratings revised its outlook on the Philippine banking sector to &quot;deteriorating,&quot; citing slower economic growth, higher energy prices, rising credit costs and mounting pressure on household finances. While acknowledging those risks, the BSP maintained that Philippine banks remain well positioned to withstand potential shocks, supported by ample liquidity, adequate capital buffers and manageable asset quality.&quot;The BSP stands ready to take appropriate supervisory action, as needed, to preserve financial stability and protect the public,&quot; the central bank said.For Remolona, those challenges reinforce, not weaken, the case for stronger institutions.Preventing financial instability, he suggests, no longer begins only when markets come under stress.It begins years earlier, through governance, supervision and public confidence.And that is only one part of the BSP&#x27;s next strategy.Beyond banking regulation, Remolona believes the country&#x27;s long-term competitiveness may increasingly depend on something most Filipinos never see: the financial infrastructure that moves money, prices risk and channels investment throughout the economy.<div>Building the financial highways investors rarely see</div>For most Filipinos, the BSP is synonymous with interest rates and inflation.For Remolona, however, the institution&#x27;s next legacy may lie in something far less visible: building the financial infrastructure that allows money, credit and investments to move faster, more safely and more efficiently across the economy.One of the clearest examples is the country&#x27;s payments system.Over the past decade, the BSP has steadily shifted the Philippines from an economy heavily dependent on cash toward one increasingly powered by digital payments. Under the Digital Payments Transformation Roadmap, digital transactions have grown from a niche payment option into a mainstream way of transferring money, paying merchants and receiving salaries.But Remolona argues that the work is far from finished.The BSP has upgraded the country&#x27;s wholesale payments infrastructure through PhilPaSS Plus, allowing banks to settle large-value transactions in real time while linking payments directly to the transfer of government securities. The reforms reduce settlement risk and eliminate vulnerabilities that once allowed the same securities to be fraudulently sold multiple times.&quot;We now have a very good... real-time gross settlement system,&quot; Remolona said, referring to PhilPaSS. &quot;The payment goes through in real time and the movement of securities goes through in real time.&quot;The improvements may sound highly technical, but their implications extend well beyond the banking industry.Efficient payment systems lower transaction costs, improve liquidity across financial markets and strengthen investor confidence -- factors that ultimately affect borrowing costs for businesses and the availability of credit throughout the economy.The BSP is now taking the next step beyond Philippine borders.&quot;We&#x27;re now working on... a system for retail transfers across countries,&quot; Remolona said. &quot;That should be operational by 2027.&quot;For the Philippines, one of the world&#x27;s largest recipients of overseas remittances, the project could significantly shorten the time it takes overseas Filipino workers to send money home while reducing exposure to foreign exchange movements.&quot;The lag is very costly because the exchange rate can move a lot in two days,&quot; Remolona explained. &quot;Here, you&#x27;re doing it instantly. You avoid what&#x27;s called the exchange-rate risk.&quot; For millions of OFW families, that means remittances reaching loved ones more quickly. For the economy, it represents another piece of financial infrastructure quietly being rebuilt beneath the surface.<div>A surprising catalyst for deeper capital markets</div>Perhaps the interview&#x27;s most overlooked revelation came when Remolona was asked about the country&#x27;s capital markets.For years, policymakers have lamented the Philippines&#x27; relatively shallow bond market, where companies continue to rely heavily on bank loans instead of raising long-term funding from investors.Rather than pointing to new bond programs or regulatory incentives, Remolona highlighted a market few outside the financial sector regularly discuss.&quot;We now have a fairly active interest-rate swap market,&quot; he said. &quot;There are trades up to the five-year maturity. It&#x27;s a backdoor way of developing a fixed-income market.&quot; The remark offers an unusual glimpse into the BSP&#x27;s thinking.Interest-rate swaps allow financial institutions and investors to manage borrowing costs and hedge interest-rate risk. As trading deepens, they also help establish more reliable benchmark interest rates and improve price discovery across the bond market.In effect, Remolona suggests the BSP may be able to deepen the country&#x27;s fixed-income market not by directly expanding bond issuance, but by strengthening the financial infrastructure surrounding it.It is a quiet, market-driven approach, one consistent with his broader philosophy that regulators should build the conditions for markets to function efficiently rather than dictate outcomes.<div>Learning from every crisis</div>The strategy also reflects lessons the BSP has spent decades learning.Just days before Remolona&#x27;s interview, the central bank launched a new book, Risk and Resilience in the Philippine Financial System: How Much Has Changed?, tracing how successive crises -- from the debt crisis of the 1980s and the Asian Financial Crisis, to the Global Financial Crisis and the COVID-19 pandemic -- reshaped banking regulation, governance and financial supervision in the Philippines.The publication argues that each crisis forced reforms that ultimately made the financial system more resilient.Whether discussing inflation expectations, governance standards, payment systems or systemic bank supervision, Remolona&#x27;s emphasis is consistent: prevent crises before they emerge rather than simply responding after the damage has been done.It is a philosophy increasingly reflected across recent BSP initiatives -- from tighter governance standards and cyber resilience measures to consumer protection reforms requiring financial institutions to shoulder greater responsibility for unauthorized online transactions.Viewed individually, these initiatives may appear incremental.Viewed together, they point to a central bank gradually redefining its mission.<div>Stability has limits</div>Still, Remolona does not suggest the BSP can secure the country&#x27;s economic future on its own.Neither does former Deputy Governor Diwa Guinigundo.While Guinigundo has praised the BSP&#x27;s commitment to price and financial stability, he has also argued that monetary policy alone cannot deliver sustained, inclusive growth.Strong institutions across government, policy consistency, infrastructure, education, innovation and regulatory predictability remain equally important in determining whether investors choose the Philippines over competing economies.The BSP, in other words, can create the conditions for investment.It cannot substitute for broader economic reforms.Guinigundo summed up the institution&#x27;s role succinctly in a separate ANC interview, saying the BSP must continue to be &quot;the adult in the room,&quot; maintaining discipline and credibility regardless of political or economic cycles.That observation reinforces rather than contradicts Remolona&#x27;s message.A central bank can anchor inflation expectations. It can strengthen banks. Modernize payment systems. Deepen capital markets. Preserve confidence in the peso. But lasting prosperity ultimately depends on institutions beyond the BSP&#x27;s mandate.<div>The next chapter for Philippine central banking</div>During the inflation surge that defined much of the Marcos administration&#x27;s first four years, Filipinos understandably watched the BSP through one number: the policy interest rate.Remolona wants the public, and perhaps policymakers, to look beyond it.His interview reveals a central bank increasingly focused on questions that rarely dominate headlines but could shape the Philippine economy for decades: How resilient are banks before the next financial shock? Can capital markets provide businesses with more long-term financing? Can payment systems move money instantly, securely and across borders?Can confidence in the BSP remain strong enough that inflation expectations stay anchored even when global uncertainty returns?Those questions may never command the same attention as an emergency rate hike or an inflation report.Yet they may ultimately prove far more consequential.Four years into the Marcos administration, the BSP appears to believe the emergency phase of post-pandemic policymaking is gradually giving way to institution-building.Its objective is no longer simply to respond to the next crisis.It is to build a financial system resilient enough to absorb it.Whether that strategy ultimately translates into faster, more inclusive and more competitive economic growth will depend not only on the BSP, but on whether the rest of government matches that long-term commitment to stronger institutions.For Remolona, however, the direction is clear.The next chapter of Philippine central banking will not be defined solely by where interest rates go.It will be defined by whether the country&#x27;s financial system is stronger before the next crisis arrives.

As fresh inflation risks emerge, the BSP says its toughest challenge is no longer simply setting interest rates, but building a financial system resilient enough to withstand the next crisis.

As fresh inflation risks emerge, the BSP says its toughest challenge is no longer simply setting interest rates, but building a financial system resilient enough to withstand the next crisis.

Beyond Inflation: Four years Into Marcos' term, BSP quietly rewrites rules of PH finance

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Beyond Inflation: Four years Into Marcos' term, BSP quietly rewrites rules of PH finance

Raine Musñgi,

ABS-CBN News

Published July 27, 2026 08:35 AM PHT

Read More:

BSP

Bangko Sentral

central bank

Eli Remolona

interest rates

inflation

banking

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