Bangko Sentral ng Pilipinas Governor Benjamin Diokno said Friday risks to the regional financial system from the coronavirus pandemic remain despite optimism for economic recovery in the months ahead.
Diokno co-chaired the Regional Consultative Group for Asia virtual meeting of the Financial Stability Board on May 18. Seventeen Asian jurisdictions participated in the meeting and were joined by the FSB Secretariat based in Basel, Switzerland.
The discussions focused on the damage caused by the economic fallout from COVID-19 and the steps taken by the financial authorities.
“What is clear is that there remain systemic risks, both risks to the financial system and risks by the financial system itself,” Diokno said in a statement.
The FSB was created in 2009 as a global venue for organizing the reform of the financial system in light of the call to pursue the objective of financial stability after the global financial crisis. The RCGA is one of six regional committees created by the FSB in 2011.
The RCGA members continued to weigh the balance between responding to the current needs of the market while mindful of any possible longer-term implications. While there is absolute recognition that “this crisis is different,” the authorities also appreciate that the unconventional interventions needed today could affect market conditions over time.
The added complication that the authorities cited is the possible effects from different paces of recovery across different jurisdictions. Multilateral agencies noted that the prospects of the advanced economies were diverging from that of the emerging markets, and this had spillover effects.
“The questions have sharpened as we now see clearer, but apparently more divergent paths in front of us,” Diokno said. He said that “knowing how these different paths affect each one of us will require a lot of discussion to fully appreciate its holistic interactions.”
Communication initiatives and macroprudential stress tests were also prominently discussed at the meeting. The participants agreed that keeping stakeholders informed was critical in sustaining the concerted efforts in the recession.
Macroprudential stress tests, on the other hand, were being used in many jurisdictions to pre-emptively identify possible vulnerabilities. The authorities highlighted the important results from these tests that could then be the basis for early action.
