The Bangko Sentral ng Pilipinas (BSP) is now fully capitalized as the national government finally released the remaining P10 billion of its mandated P50-billion capitalization.
“Regarding the query on the P10-billion capitalization, the BSP already received the amount this week,” BSP Governor Amando Tetangco Jr. said in a text message.
The remaining P10-billion capitalization is part of the P50-billion capitalization mandated by the Republic Act 7653, or the New Central Bank Act of 1993.
The law mandated the government to provide a P50-billion initial infusion for the BSP to support the central bank’s capital requirement to sustain the macroeconomic stability of the country.
In an earlier statement, BSP Deputy Governor Diwa Guinigundo said that a fully capitalized central bank can provide greater support in promoting price and financial stability that in turn could provide a very good macroeconomic condition for the Philippines.
According to the Department of Budget and Management (DBM), the government released the “final tranche payment” to complete the P50-billion capital infusion of the BSP for the fiscal year 2013.
“Although the first P10-billion equity infusion for [BSP] was made in 1997, the government has since been unable to provide full capital support to the central bank as prescribed by law . . . The Bangko Sentral’s P50-billion capital requirement is now wholly accounted for,” Abad said.
The DBM emphasized that since 1997, the government was able to fulfill the equity infusion requirement in the Aquino administration as the DBM disbursed P10 billion for the second tranche in 2011 and P20 billion for third tranche in 2012.
Abad said that the budget deficit “hovering below target” made it possible for the Aquino administration to pay the P10-billion tranche in December last year.
“The country grappled with huge losses in the aftermath of major calamities this year, and the administration needed to respond very quickly to the urgent aid requirements in the wake of these disasters. This forced us to briefly defer the release of the last tranche of the equity payment,” the Budget secretary said.
“Nonetheless, the below-the-cap deficit and the government’s own prudent management of its resources eventually allowed us to complete the capital infusion to [BSP], an institution that has performed remarkably well in keeping interest rates low and protecting the Philippine peso from volatile market forces,” he added.
Full capitalization to uplift economy
The government’s payment tranche to the BSP capital infusion is also seen to uplift the Philippines’ economic growth in the long term.
“In plainer terms, the 100-percent equity infusion will give the central bank the resource legroom it needs. Faced with fewer risks of income loss or balance sheet weakness, the Bangko Sentral can now direct its full attention to refining the country’s banking and monetary policies and delivering key services that will further stimulate the economy,” Abad said.
“We’re now looking at a central bank that’s in a much better position to preserve the Philippines’ macroeconomic strength and vibrant investment climate, which in turn will influence the Aquino administration’s ability to ensure long term and inclusive growth in the country,” he added.
Meanwhile, besides from the P50-billion capitalization, the BSP is seeking for an additional P150-billion capitalization in order to enhance its administrative and fiscal autonomy amid a growing Philippine economy.
The additional infusion will enable the BSP to meet the needs of the expanding economy and growing complexity and sophistication of the financial system.
It will also allow the central bank to pursue its mandate of price stability conducive to a balanced and sustainable growth of the economy.