Financial Stability Report

SINCE the global financial crisis of 2008, financial stability has become a permanent concern for economic managers across the globe. In the Philippines the Financial Stability Coordination Council (FSCC or Council) has been constituted to be on the lookout for systemic financial risks.

The Financial Stability Report (FSR) is a publication of the Council of which the Insurance Commission is a member together with the Bangko Sentral ng Pilipinas, the Department of Finance, Philippine Deposit Insurance Corp. and the Securities and Exchange Commission. It is prepared by the Office of Systemic Risk Management of the BSP which is the technical secretariat of the FSCC. It was released for the first time to the general public in August 2018 and will be released to the public annually thereafter. It is designed to be the communication tool of the Council. It is also intended to enhance transparency and promote the adoption of global best practices among the macroprudential regulators such as the Insurance Commission. According to the Bank for International Settlements (BIS), “financial stability reports have become the primary and most efficient means of communication of financial stability risks.”

The FSR (covering 2017) is presented with a thematic approach. According to a statement of the FSCC, “the FSR takes a thematic assessment of the various risks that could pose a challenge to the continued growth of the Philippine economy as well as the resilience of the Philippine financial system.” For the 2017 FSR, it focused “on the impact of globally rising interest rates and weaker currencies against the benchmark US dollar as this relates to the repayment, refinancing and repricing of debt.”

Other countries have issued their FSRs to the public, as well. This would include the United States, United Kingdom, the Eurozone, Australia, New Zealand, Japan and South Korea. In the Asean, FSRs are issued by Indonesia, Malaysia, Singapore and Thailand. The central banks of England, Sweden and Norway published their first FSR around 1996. About 65 countries publish an FSR.

The FSR reports on the FSCC’s “assessment of the overall risks to the financial market.” A recurring theme in the FSCC is the Systemic Risk Review wherein brewing systemic risks are reviewed and evaluated for intervention. Indeed, financial stability is the main agenda. Identifying “systemic risks” and pursuing “financial stability” are complicated tasks, as these terms are, in fact, largely undefined. According to the 2017 FSR, “with financial markets becoming much more complex and interconnected, systemic risks—however defined—could originate from different sources while a seemingly contained market dislocation could still escalate into a full-fledged crisis.”

As correctly pointed out in the FSR, “a key lesson from the crisis is that the interconnectedness of financial market elements can amplify the build up of systemic risks once a shock is introduced,” referring to what is known as a contagion. It could also refer to what is known as “black swans” which has been defined as “events which are impossible to predict yet have catastrophic ramifications.” The theory behind the term was pioneered by Nassim Nicholas Taleb. The term emanated from an old belief that black swans did not exist until shocked Europeans discovered black swans in Australia (“All observed swans are white—hence all swans are white”). 

The FSCC has identified five underlying risks that it focuses on: macroeconomic risks, credit risks, market risks, liquidity risks and the eventual contagion risks.      

Dennis B. Funa is the current insurance commissioner. Funa was appointed by President Duterte as the new insurance commissioner in December 2016. E-mail:


Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Previous Article

Total solutions to half-understood problems

Next Article

Build an army of ‘economic cadres’ for the poor

Related Posts

Opinion - BusinessMirror
Read more

Let’s help preserve humanity’s lifeblood

The Earth is known as the “Blue Planet” because 71 percent of its surface is covered with water. The oceans hold about 96.5 percent of all Earth’s water. Of the waters occupying the planet’s surface, only 3 percent is considered freshwater. And most of this freshwater reserve is inaccessible to humans — locked up in polar ice caps or stored too far underneath the Earth’s surface to be extracted. Furthermore, much of the freshwater that is accessible has become highly polluted. This leaves us with roughly 0.4 percent of the Earth’s water that is usable and drinkable to be shared among seven billion people.

Column box-Sonny Angara 2
Read more

A big push for micro, small and medium enterprises

Earlier this week, we sponsored a measure that will institutionalize the Shared Service Facilities (SSF) Project of the Department of Trade and Industry (DTI). Through the SSFs micro, small and medium enterprise (MSME) qualified beneficiaries are provided with the appropriate machinery, equipment, and tools under a “shared” system that would address known gaps in the value chain, most notably the lack of adequate and appropriate facilities, which hinder them from elevating their products and services and enabling the creation of export-ready goods.

Read more

Women, economics, and economy

IN 1994, Ms. Universe Sushmita Sen gave her award-winning answer to the question of a woman’s true essence. Ms. Sen said, “Just being a woman is a gift of God that all of us must appreciate. The origin of a child is a mother, who is a woman.” Her reply implies that a woman’s reproductive role centers on being a biological bearer of infants—something that is expected and natural.