New Framework Launched by Regulators to Protect PH Financial System

The Financial Stability Coordination Council (FSCC) launched the Systemic Risk Crisis Management (SRCM) framework on Monday in an effort to maintain the stability of the country’s financial system. The framework safeguards markets and investments from potential threats or disruptions through the surveillance of risk trends, review of infrastructures, conducting systemic stress tests, and open communication.

“The SRCM is in keeping with the objective of managing systemic risks and strengthening the resilience of the system,” explained Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno. “It defines arrangements among the FSCC agencies that we will rely on in good times so that we are best organized under stressed conditions.”

Collectively, the BSP, Department of Finance (DOF), Insurance Commission, Philippine Deposit Insurance Corp. (PDIC), and the Securities and Exchange Commission (SEC) make up the FSCC. “Financial stability, after all, is about systemic risks and the continuous task is to enhance the resilience of the financial system,” Diokno elaborated. “Stability is therefore simply about risks and resilience — ensuring the latter by both avoiding shocks to the system as well as strengthening the ability to recover once those shocks occur.”

BSP Assistant Governor Johnny Noe Ravalo echoed similar sentiments, noting that the SCRM is “about being able to recover very quickly” in the face of disruption rather. “So, the idea of the SRCM is [to] organize the framework that allows us to anticipate, to assess, to evaluate, where the vulnerabilities will lie, and what those interventions will be. The point of the SRCM is not to forecast but to be prepared for the next crisis.”

On the part of the PDIF and the SEC, both agencies hope that this framework will allow them to relay information to investors more efficiently. “The public needs to know as to what is happening and what regulators are doing,” said PDIC President Roberto Tan “[It’s] a balance on how much information you want to give but you have to give prompt and timely information that is relevant and needed for investors to be reassured that you are addressing and on top of a situation.”

“While it is virtually impossible to forecast the next crisis, its timing and its specific nature, this should not stop us from being prepared. This is the essence of the SRCM and it includes technical aspects as well as the critical element of communication. The ultimate objective is to improve the welfare of current and future generations. We do that through a well-functioning financial market, interlinked within its various components and collaborating with the rest of the real economy,” concluded Diokno.

Sources: Manila Times, Manila Bulletin