The central bank said it has not seen any sign of negative impact on the Philippine economy of the start of the Brexit or the United Kingdom’s disentangling from European Union laws.
Over the weekend, Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. said that so far, there has been no palpable impact on the Philippines of Brexit because the markets are also watching how the situation in the EU will move forward.
Agence France-Presse has reported that Britain began on Thursday last week the messy task of disentangling itself from EU laws, as the first signs of rancor between London and Brussels emerged at the start of their two-year divorce proceedings.
As some of the EU’s top leaders gathered to flesh out their strategy for the hard talks ahead, Britain was to publish its plan to extricate itself from four decades of European regulation, it said.
“But one thing that was mentioned by an EU official was that the UK is leaving the Union but not Europe,” Tetangco told reporters.
He pointed out that this statement is very significant because it means the UK will continue to develop economic relations with the other European countries, though not under the framework of the Union.
“So if they are able to do that then that would be positive for the market,” he said.
However, Tetangco stressed that it may take a little while because the UK still has to negotiate and see how it can execute the decision based on wishes of the British people.
“During this period there might be questions that might be asked, and therefore, we may see some market reaction in terms of, probably, some volatility,” he warned, but stressed that in the case of the Philippines, the impact is not expected to be significant.
“Because we don’t have very large trade and investment transactions with the United Kingdom,” he said, noting that Philippine exports to the UK comprise less than 1 percent of the total.
“Remittances are quite significant but we have very knowledgeable, skilled Filipino workers who are always in demand. We’ll continue to monitor that,” he said.
Last year, the BSP also said that that stress test showed that the Philippine banking system will only suffer limited impact from the Brexit.
It said the claims of Philippines banks on the UK and the EU account for only 0.6 percent of the total assets of the Philippines banking system. These same claims also account for only 5.4 percent of total capital of the Philippine banking system.
The BSP said the stress test assumed there is a 100-percent write-off of all claims of Philippine banks on UK and EU.
It revealed that the 14 DSIBs will still be able to meet the minimum capital requirement and for most of them, their earnings will be sufficient to cover potential losses on extreme scenarios.
DSIBs or domestic systemically important banks are banks whose distress or disorderly failure would cause significant disruptions to the wider financial system and economy.