The Philippines expects to ride out the worst of the Eurozone debt crisis.
Amando M. Tetangco, Jr, Governor of the Bangko Sentral ng Pilipinas (BSP), the central bank, said the limited exposure of Philippine banks in Europe and European banks in the Philippines amounts to only 1.2% of total assets of the Philippine banking system.
He also pointed to the strong capitalization of Philippine banks, which is at or above the 8% required by international standards and the 4% mandated by the Philippine government.
"But more than the ample domestic liquidity that the banks can efficiently and effectively intermediate to users, BSP has outstanding facility in place that banks can tap should a global credit squeeze occur," Tetangco said.
He said that the central bank’s primary objective is to keep prices low and stable even as it cut policy rates twice this year in response to the Eurozone debt crisis.
He saw no need to further ease key rates as the government has accelerated spending and exports have begun to increase.
"We first want to see how our policy actions filter into the economy,” he said, noting that unless there are new developments that would put the Philippines’ monetary targets at risk, the BSP sees no need to make further adjustments to policy rates.
To fend-off hedging and speculative attacks on the peso, the BSP has set higher risk rates for non-deliverable forward transactions. He said measures that make it more costly for banks to engage in NDF transactions resulted in lessening the Philippines’ vulnerability to risks from the Eurozone debt crisis.
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