Promoting financial stability

Every nation aims to achieve financial stability (FS) as a critical policy objective as well as an encompassing prudential norm for market oversight.

The 2008 global financial crisis provided the stimulus for various central banks across the world to implement new policies and measures to prevent the next crisis and better protect the investing public. The measures were not only created by financial authorities to strengthen financial institutions, but more importantly, to strengthen the global financial systems.

In addition, financial stability is a worldwide concern and as such, the Bangko Sentral ng Pilipinas (BSP) and the International Monetary Fund (IMF) held a two-day regional dialogue on the topic.

With the theme Ensuring Financial Stability in the Region: Some Policy and Practical Issues, the regional forum was the first of its kind, gathering various central bank governors and other high-level officials from ASEAN (Association of South East Asian Nations) member-states.

During the forum, the panelists highlighted how the global financial crisis have brought into focus the complexity of web linkages among markets, institutions, products, information and agents. According to both the BSP and IMF, a resilient and robust financial system could manage potential risks effectively arising from the interconnections between and among market players.

“Since financial stability is anchored on a well-functioning financial market, it is necessary, both as a building block of a robust economy and to avoid the occurrence of another crisis,” they said.

Delivering a message on behalf of the BSP Governor, Deputy Governor Chuchi Fonacier said that while the definition of financial stability varies from different jurisdictions, it is ultimately about a thriving and a well-functioning financial system.

“Financial stability is therefore more than just the absence of instability preventing the next crisis. There is a positive side to it, which is to ensure that the financial system continues to be a transformative tool for the public,” Fonacier said.

“This is the compelling case for why the authorities should be engaged in this policy sphere,” she added.

The forum also pushed forward the creation of a FS network, which will help ASEAN member-states in their journey towards financial stability.

Formally launched on 21 January 2019, the network will be a venue to raise awareness on FS concerns and a means for facilitating an active exchange of knowledge, insights information and experiences among members.

While the FS network allows bilateral engagement among its members, the BSP’s office of systemic risk management (OSRM) provides an alternative way to course both communications and concerns.

The OSRM will act as the central point of contact for the network and can be reached at the BSP’s website.

According to Fonacier, among the realizations from the global financial crisis include the need to re-assess the country’s framework and models as “stress points in the financial market are not simply auxiliary issues.”