Despite the normalization of policy settings, the Bangko Sentral ng Pilipinas' policy rate is still accommodative, BSP Governor Felipe Medalla said on Thursday.
"Remember: we're coming from 4 percent pre-pandemic. As you can see, our policy rate is still lower than it used to be. If you compare policy rate to inflation, the real rate is still negative," Medalla said during the Finance PH 2022 by the Asian Banker.
"Achieving a target-consistent path of inflation is of great importance to us. Respectable growth is still possible under these terms, but for the BSP, price stability, one of our pillars, is the primary concern," the governor added.
As of its August policy meeting, the BSP has raised the policy rate by a cumulative 175 basis points (bps).
"We started with two 25 bps, followed by an off-cycle 75 bps, then a follow-through 50 bps. And as you hear this speech, the Board will have a policy meeting. Of course, we will do what is necessary to achieve a target-consistent inflation path," Medalla said.
Moreover, the governor also said that with regard to the financial sector . . . "our banks are growing without sacrificing the stability of the financial system and the interest of depositors."
All these are with positive statistics: growing assets, recovering loan growth, increasing deposits, and sustained profitability while remaining sufficiently capitalized and liquid.
Bank leaders remain optimistic about the growth of the economy but banks currently face several risks.
"According to our Banking Sector Outlook Survey for the second semester of 2021, banks have identified credit risk, cybersecurity risk, and environment-related risk as top risks, the governor said.
For the BSP's part, financial stability is its' second BSP pillar, and this calls for close monitoring of risks and the crafting of relevant regulations.
Based on its surveillance toolkit, "our banks remain on stable footing. So far, banks have been able to manage risks at the institutional level," the governor said
As of July 2022, the gross NPL ratio remains at single-digit – 3.57 percent from 3.60 percent a year ago. This was matched by ample NPL coverage ratio of 99.2 percent.