Welcome and wise
The choice of a career official to replace the globally recognized head of the Bangko Sentral ng Pilipinas is a most welcome decision by President Duterte. For one, it ensured the continuity of stable monetary policies and the independence of the central bank from politicking. The choice was, as the Inquirer had pointed out, the candidate with the required credentials and the least political connections.
The stock market reacted positively to the appointment of Nestor Espenilla Jr. as successor to BSP Governor Amando Tetangco Jr., whose term will end on July 2. The main price barometer Philippine Stock Exchange index (PSEi) rose 0.23 percent to 7,980.36 the day after the announcement.
The reactions of the international financial community were all positive. They noted that the appointment of the insider Espenilla meant a seamless transition of leadership and policy continuity, citing his promise to continue to adhere strictly to the BSP’s inflation-targeting framework. The choice of Espenilla also validated the official line that President Duterte understood the importance of maintaining an independent and credible central bank, according to a Japanese investment house. It added that Espenilla’s track record as BSP deputy governor in charge of bank supervision made him the best qualified official to tackle the challenges ahead.
Espenilla is a career employee who started working in the BSP as a debt analyst in 1981, a difficult period for the Philippines that culminated in an economic crisis that pushed the country into de facto bankruptcy in 1983, stopping its foreign debt payments due to a lack of dollars. He graduated magna cum laude from the University of the Philippines with a degree in business economics. He steadily rose through the ranks at the BSP until he was appointed deputy governor in 2005 and headed the bank supervision division. He has more than 35 years of experience in all aspects of central banking—monetary policy, banking supervision and financial regulation, payments system oversight, capital markets development, currency management, consumer protection and financial inclusion advocacy.
In an interview with the Inquirer in February, Espenilla said the Philippines’ next central bank governor would have to adopt job creation as “mission No. 1” and to help ensure that more of the country’s 100 million citizens would enjoy the benefits of economic growth. This, he said, was key to overcoming large-scale poverty and achieving a peaceful and stable society.
Going forward, Espenilla faces a number of challenges at the helm of the BSP. These will include, among others, the need for tighter regulation to clamp down on financial crime; the relaxation of the bank secrecy law, already proposed in the first package of tax reforms, to aid effective enforcement; coping with a regime of rising interest rates as indicated by the US central bank; and surviving the rising protectionism around the world that can impact trade and the foreign exchange.
In an earlier television interview, Espenilla noted that he would prioritize reforms in digital finance and informal lending, noting that far too many Filipinos have limited access to financial services. He said he wanted strict monitoring of banks and financial institutions so Filipinos could build their trust in them. He added that he wanted a more proactive role for the BSP in promoting the Philippines’ growth: “A key role is to be a steadfast and credible champion of structural reforms in the financial system—in particular, promoting a modern digital financial ecosystem that allows innovative and competitive financial services, enables all to participate, and treats clients fairly.”
President Duterte’s “most important economic decision” of naming a new central bank governor for the next six years was a wise one, indeed. We wish Espenilla the best as he takes on the work ahead to keep the Philippine financial system stable and in step with the times.
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