The International Monetary Fund (IMF) joined the Bangko Sentral ng Pilipinas (BSP) recently in hosting the “2023 International Conference on Financial Stability,” a biennial conference whose aim is to promote the research and discussion of topics related to macro-prudential policy and financial stability among policy-makers, academicians, and finance industry practitioners.
The conference, which was held in Mactan, Cebu from May 15 to 16, 2023, had a hybrid format with most of the speakers participating in person. It was attended by 14 central banks and financial authorities from the ASEAN region and also had representatives from at least six regional and global organizations.
The private sector was also fully represented by 31 organizations.
BSP Senior Assistant Governor Johnny Noe Ravalo (leftmost) together with (from left) Financial Stability Board Chairman Dr. Klaas Knot, BSP Governor Felipe M. Medalla, Bank of Thailand Deputy Governor Ronadol Numnonda, and Ayala Corp. President and CEO Cezar P. Consing. (IMAGE CREDIT: PNA)
The theme of the conference was “The New Frontier of Financial Stability: Global Problems, Global Solutions, Local Challenges,” which suggested that global developments invariably spill over to various jurisdictions. In fact, one of the event’s highlights included putting the spotlight on Asia as a collective body in light of the systemic risk issues affecting the global economy.
During the event, the participants were first made to look at how Asia can find a collective solution. The conference was then organized to assess how systemic risks can be managed. It was quickly followed by a discussion on the challenges of communicating these risk issues to the public.
Finally, a dialogue was also held on how stakeholders should cope with changing market conditions.
During the discussions, the participants also touched on the issue of the need for a common approach in light of the latest forecast from the IMF, which stated that Asia could contribute up to 70 percent of world growth in 2023.
“With Asia projected to contribute around 70 percent of growth this 2023, authorities need to come up with a coordinated effort to limit and thwart the systemic risks that may arise from the current situation,” stated Dr. Johnny Noe E. Ravalo, BSP Senior Assistant Governor.
“Among the issues faced by the world right now are high-interest rates and elevated inflation. There is also a need to cope with new challenges, such as the impact of the banking issues in the U.S. and the possible recession of the world’s largest economy,” he explained.
Asked how Asia will be able to address the current situation sans coordinated efforts among regulators, Ravalo said this is what authorities from the region and international organizations wanted to find out at the conference. He explained that as of the moment, this is being discussed on a per-country level only.
For his part, BSP Governor Felipe M. Medalla highlighted the lessons learned during past crises, namely the building up of strategic forex reserves and enhancing rules on bank capitalization, liquidity, and risk management. He said that today’s environment poses a different set of challenges for the authorities as well as the market stakeholders.
“It’s finding the middle [where] there’s enough creativity [encouraged] but without thinking in terms of the public cost of mistakes,” he said in his keynote address.
According to Medalla, this balance would help crisis-proof the system.
“Moving forward, regulators should continue to strike a careful balance between establishing strong institutions while encouraging innovation in the design of tools that would have the requisite safeguards to build in resilience,” added Medalla.
The BSP and the IMF first co-hosted the inaugural regional dialogue on Financial Stability in January 2019, and that initial conference was held in Manila. To date, Systemic Risk management is once again front and center as authorities prepare for what lies ahead while responding to the current challenges.