Experts welcomed the appointment of current Central Bank Deputy Governor for the Supervision and Examination Sector Nestor A. Espenilla Jr. as the next Bangko Sentral ng Pilipinas (BSP) governor, noting the positive effects of “continuity”, amid changing financial market conditions.
Several economists on Tuesday issued their early assessment of Espenilla’s appointment to the post, as announced by President Duterte’s economic managers late Monday.
He will take over from Amando M. Tetangco Jr., who will end his second term as BSP chief on July 3.
“In our view, this is a positive appointment for a few reasons. First, it bodes well for a seamless transition and policy continuity—we think under Espenilla’s leadership, [the] BSP will continue to adhere strictly to its inflation-targeting framework,” international financial services company Nomura said. “Second, it validates official rhetoric earlier that President Duterte understands the importance of maintaining an independent and credible central bank,” it added.
“Third, apart from preserving Tetangco’s legacy, a key task for the next governor will be to address reform issues, including, among others, amendments to the bank-secrecy law, the antimoney laundering act and the BSP charter, as we have argued before,” Nomura further said.
In a news conference at the BSP Complex on Tuesday afternoon, Espenilla said “drastic deviations” should not be expected and highlighted continuity of reforms for his upcoming term as governor.
Espenilla further said among his legislative agenda include the push for the pending amendments in the BSP charter, the relaxation of bank- secrecy law, and the expansion of antimoney laundering provisions to other sectors in the economy.
The incoming BSP governor also talked about his plans on continuing the expansion of financial inclusion in the country through digitalization of the payments system in the country, as well as reforms in the capital market.
“Those are very big shoes to fill up. It’s like a basketball team. Our captain is graduating. I think I don’t have to reinvent everything. I will be able to sleep at night because [Tetangco] has developed a very strong BSP team,” Espenilla said.
ING Bank Manila economist Joey Cuyegkeng is one of the economists who welcomed Espenilla’s appointment, saying it demonstrates “the President’s confidence with and trust on his economic team”.
“The decision also displays the strong influence of his economic team, especially Finance Secretary [Carlos G.]Dominguez [III],” Cuyegkeng said.
“BSP monetary policy under the future governor is unlikely to change. Inflation targeting would remain while the risk-related policy bias would continue…. Overall, the decision is positive not only for the monetary system but for the economy—continuity and progress and display of President’s preference and disposition to economic expertise [and his economic team],” the economist added.
Espenilla also bared particulars of his early plans upon his assumption of the governor post in an interview with select reporters—most of which represent continuity of Tetangco’s reforms in his 12-year term.
“I will push for financial-market reforms, constantly look out for opportunities for liberalization, possible phasedown in reserve requirement, develop capital markets and implement more reforms,” he told select reporters in an interview.
“My main advocacy is to put in place regulation and processes that will make financial markets work more efficiently and make doing business easier. This is slow burn but high
yielding. Financial inclusion is a priority and I plan to ‘digitize’ the financial system while making sure that necessary safeguards are in place. This is going to be a balanced approach, not going in one direction,” Espenilla added.
“The phasedown of the reserve requirement will happen in stages and is not associated with relaxation of monetary policy. I want to change the approach of reserve requirement and turn it into a nonmonetary tool to an open market tool,” he further said.
The incoming BSP governor, however, declined to comment on the path of future monetary policy, except that he will continue and adopt the current “structured process” of being data-dependent.
Tetangco is scheduled to step down in July after two consecutive terms as the central bank chief. He is the first governor to serve two consecutive terms, and under a total of three different presidents.
Tetangco has earlier expressed confidence in the appointment of Espenilla, saying the choice of an “insider” for the position ensures the continuity of the policy and thought process in the BSP.
“I am confident that with him at the helm, the BSP will continue to be a pillar of support to the economy that should remain among the top performing economies in the world,” Tetangco earlier said.
Espenilla is a veteran central banker and currently serves as the deputy governor for the supervision and examinations sector. He is deputy governor since April 2005.
He joined the BSP in 1981, and continued as a working student in 1982.
With about 35 years of central banking experience, Espenilla’s name has been linked to several banking regulation that made the local lending industry into one of the most resilient in recent history.
With a report from Kathleen Jose & Ma. Stella F. Arnaldo