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Increased intra-Asian trade backed by the advancement
in financial deepening will help mitigate the adverse impact of a
global economic slowdown on Asian economies, Bangko Sentral ng
Pilipinas Gov. Amando Tetangco Jr. said
Tetangco was articulating the
view of the governors during a recent meeting of the South East
Asian central banks in Jakarta that the region’s economy will be
kept buoyant by stronger financial institutions, which allow for
greater risk diversification.
“The governors’ assessment is
that despite the different stages of financial deepening, which
individual economies are currently at, the advancement in financial
deepening (from generally bank-centered structure to the more
sophisticated market-based financial system) will continue despite
the recent international financial turbulence,” Tetangco told
reporters.
Financial deepening refers to the
increased provision of financial services with a wider choice of
services as well increase in money supply. The more liquid is the
money available in an economy, the more opportunities exist for
continued growth.
Although Asian economies would
still be affected by the global slowdown, Tetangco said there was
also a conviction that increased intra-Asian trade and relatively
healthier domestic demand in Asian economies will help mitigate the
adverse impact of a slowdown in the major economies.
The Philippine economy grew 7.3
percent last year driven mainly by domestic consumption. This was
supported by strong foreign exchange inflows buoyed by remittances
from overseas workers and resiliency in service sectors.
BSP has been promoting to
strengthen the risk management system of banks, urging recently to
divert focus from capital buildup to help banks absorb unexpected
shocks or the impact of the subprime crisis in the United States.
Robust risk management and strong
capital positions are critical in ensuring that individual banks
operate in a safe and sound manner, which enhances stability of the
financial system.
The recent impact of the subprime
crisis in the US illustrates that minimum capital requirements may
not be enough.
The industry has been adopting
Basel 2, the new set of international standards for establishing
minimum capital requirements for banking organizations worldwide.
The recent conference of
governors in Jakarta dealt with financial deepening and its impact
on monetary policy and sustained economic growth. It also tackled
regional cooperation in terms of strengthening financial market
surveillance, capacity building in terms of understanding structured
finance, and work on necessary enhancements on supervision
practices.
--Maricel E. Burgonio
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