{ "title": "IMF Executive Board Concludes Financial System Stability Assessment with Philippines", "publication": "IMF News, April 9, 2021", "sourceUrl": "https://www.imf.org/en/news/articles/2021/04/09/pr21105-philippines-imf-executive-board-concludes-financial-system-stability-assessment", "canonical": "https://www.imf.org/en/news/articles/2021/04/09/pr21105-philippines-imf-executive-board-concludes-financial-system-stability-assessment", "overlayPath": "/en/news/articles/2021/04/09/pr21105-philippines-imf-executive-board-concludes-financial-system-stability-assessment/index.md", "summary": "The Executive Board of the International Monetary Fund (IMF) concluded the Financial System Stability Assessment with the Philippines on March 5, 2021.", "publishDate": "2021-04-09", "sections": [ { "heading": "Scope and timing", "content": "- The Executive Board of the International Monetary Fund (IMF) concluded the Financial System Stability Assessment with the Philippines on March 5, 2021.\n- The Financial Sector Assessment Program (FSAP) work was conducted during the COVID-19 outbreak, with the virtual missions concluding on October 20, 2020, and adapted to include immediate risks and vulnerabilities brought up by the pandemic.\n- Press Release date: April 9, 2021." }, { "heading": "Economic context and key risks", "content": "- Real GDP contracted by 9.5 percent in 2020—a much steeper decline than during the Asian Financial Crisis.\n- The economy is recovering, and macroeconomic fundamentals at the onset of the COVID-19 were stronger than in the late 1990s.\n- The Financial Action Task Force (FATF) may put the country on the so-called grey list in 2021 without significant reforms on the effectiveness of the Anti-Money Laundering and Counter Financing of Terrorism (AML/CFT) regime.\n- Significant legislative measures were enacted in early 2021 to address some of the FSAP recommendations.\n- The Philippines is vulnerable to increased typhoon risks from climate change owing to its geographical position." }, { "heading": "Stress testing and scenario findings", "content": "- Stress tests show that banks can withstand the already severe baseline scenario.\n- Banks could experience systemic solvency distress if the economic impact of COVID-19 turns out to be severer.\n- Transmission channel: the economic shock would weigh on corporate earnings and then spill over to banks.\n- Bank stress could limit credit supply, reducing economic growth noticeably even more.\n- Physical risks from climate change are relevant for financial stability, though infrastructure destruction from typhoon wind alone is not systemic unless extreme tail events materialize.\n- Higher median and estimated losses were used in the stress testing exercise for severer scenarios." }, { "heading": "Regulatory and supervisory framework", "content": "- The Bangko Sentral ng Pilipinas (BSP) has modernized its oversight framework for banks since the 2010 FSAP.\n- BSP shows reasonably good compliance with the Basel Core Principles (2020 BCP assessment).\n- The BSP plays the central role in the macroprudential policy framework given the dominance of banks in the financial system.\n- The 2019 amendments to the BSP charter further strengthened the financial stability policy framework.\n- Material gaps remain:\n - BSP’s legal powers related to conglomerate supervision.\n - Bank secrecy laws are limiting the effectiveness of supervision and have wider financial sector implications.\n- At the wake of the COVID-19 crisis, the BSP issued time-bound regulatory relief measures, including unusually strong forms of forbearance related to non-performing loan recognition and provisions, subject to prior notification to and approval of the BSP." }, { "heading": "Financial safety net and resolution framework", "content": "- Some progress has been made reforming the financial safety net, but a number of issues highlighted in the 2010 FSAP are still relevant.\n- Resolution powers are provided to both the Philippine Deposit Insurance Corporation (PDIC) and the BSP, making the resolution process relatively complex.\n- The prompt corrective action framework could be enhanced by including more specific escalation procedures.\n- The resolution toolkit is largely limited to liquidation and resolution planning.\n- Resolvability assessments are not in place yet.\n\nInternational Monetary Fund press release, April 9, 2021.\n\n---\n\n\n References\n\n- https://www.imf.org/-/media/images/imf/bios/imfboard.jpg\n- The Executive Board\n- Philippines and the IMF\n- Press Releases\n- PRESS CENTER\n- 2020 BCP assessment\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2021/04/09/pr21105-philippines-imf-executive-board-concludes-financial-system-stability-assessment" } ], "bullets": [ "[Markdown version](/en/news/articles/2021/04/09/pr21105-philippines-imf-executive-board-concludes-financial-system-stability-assessment/index.md)", "[Structured JSON version](/en/news/articles/2021/04/09/pr21105-philippines-imf-executive-board-concludes-financial-system-stability-assessment/index.json)", "[Bundle manifest](/en/news/articles/2021/04/09/pr21105-philippines-imf-executive-board-concludes-financial-system-stability-assessment/bundle-manifest.json)", "Published: April 9, 2021", "The Executive Board of the International Monetary Fund (IMF) concluded the Financial System Stability Assessment with the Philippines on March 5, 2021.", "The Financial Sector Assessment Program (FSAP) work was conducted during the COVID-19 outbreak, with the virtual missions concluding on October 20, 2020, and adapted to include immediate risks and vulnerabilities brought up by the pandemic.", "Press Release date: April 9, 2021.", "Real GDP contracted by 9.5 percent in 2020—a much steeper decline than during the Asian Financial Crisis.", "The economy is recovering, and macroeconomic fundamentals at the onset of the COVID-19 were stronger than in the late 1990s.", "The Financial Action Task Force (FATF) may put the country on the so-called grey list in 2021 without significant reforms on the effectiveness of the Anti-Money Laundering and Counter Financing of Terrorism (AML/CFT) regime.", "Significant legislative measures were enacted in early 2021 to address some of the FSAP recommendations.", "The Philippines is vulnerable to increased typhoon risks from climate change owing to its geographical position.", "Stress tests show that banks can withstand the already severe baseline scenario.", "Banks could experience systemic solvency distress if the economic impact of COVID-19 turns out to be severer.", "Transmission channel: the economic shock would weigh on corporate earnings and then spill over to banks.", "Bank stress could limit credit supply, reducing economic growth noticeably even more.", "Physical risks from climate change are relevant for financial stability, though infrastructure destruction from typhoon wind alone is not systemic unless extreme tail events materialize.", "Higher median and estimated losses were used in the stress testing exercise for severer scenarios.", "The Bangko Sentral ng Pilipinas (BSP) has modernized its oversight framework for banks since the 2010 FSAP.", "BSP shows reasonably good compliance with the Basel Core Principles (2020 BCP assessment).", "The BSP plays the central role in the macroprudential policy framework given the dominance of banks in the financial system.", "The 2019 amendments to the BSP charter further strengthened the financial stability policy framework.", "Material gaps remain:", "At the wake of the COVID-19 crisis, the BSP issued time-bound regulatory relief measures, including unusually strong forms of forbearance related to non-performing loan recognition and provisions, subject to prior notification to and approval of the BSP.", "Some progress has been made reforming the financial safety net, but a number of issues highlighted in the 2010 FSAP are still relevant.", "Resolution powers are provided to both the Philippine Deposit Insurance Corporation (PDIC) and the BSP, making the resolution process relatively complex.", "The prompt corrective action framework could be enhanced by including more specific escalation procedures.", "The resolution toolkit is largely limited to liquidation and resolution planning.", "Resolvability assessments are not in place yet.", "[https://www.imf.org/-/media/images/imf/bios/imfboard.jpg](https://www.imf.org/-/media/images/imf/bios/imfboard.jpg)", "[The Executive Board](https://www.imf.org/external/np/sec/memdir/eds.aspx)", "[Philippines and the IMF](http://www.imf.org/external/country/PHL/index.htm)", "[Press Releases](https://www.imf.org/en/news/searchnews)", "[PRESS CENTER](http://presscenter.imf.org/)", "[2020 BCP assessment](https://www.imf.org/en/Publications/CR/Issues/2020/11/10/Philippines-Financial-Sector-Assessment-Program-Detailed-Assessment-of-Observance-Basel-Core-49874)", "[https://www.imf.org/en/home](https://www.imf.org/en/home)" ], "alternates": { "markdown": "/en/news/articles/2021/04/09/pr21105-philippines-imf-executive-board-concludes-financial-system-stability-assessment/index.md", "json": "/en/news/articles/2021/04/09/pr21105-philippines-imf-executive-board-concludes-financial-system-stability-assessment/index.json", "bundleManifest": "/en/news/articles/2021/04/09/pr21105-philippines-imf-executive-board-concludes-financial-system-stability-assessment/bundle-manifest.json" }, "generatedAtUtc": "2026-09-26T00:18:52.283Z" }