Overview of the BSP

The Bangko Sentral ng Pilipinas (BSP) is the central bank of the Republic of the Philippines. It was
established on 3 July 1993 pursuant to the provisions of the 1987 Philippine Constitution and the New
Central Bank Act of 1993. The BSP took over from the Central Bank of Philippines, which was established on
3 January 1949, as the countrys central monetary authority. The BSP enjoys fiscal and administrative
autonomy from the National Government in the pursuit of its mandated responsibilities.

The BSP Seal

The new BSP logo is a perfect round shape in blue that features three gold stars and a stylized Philippine
eagle rendered in white strokes. These main elements are framed on the left side with the text inscription
Bangko Sentral ng Pilipinas underscored by a gold line drawn in half circle. The right side remains open,
signifying freedom, openness, and readiness of the BSP, as represented by the Philippine eagle, to soar and
fly toward its goal. Putting all these elements together is a solid blue background to signify stability.
Principal Elements:
1. The Philippine Eagle, our national bird, is the worlds largest eagle and is a symbol of strength, clear
vision and freedom, the qualities we aspire for as a central bank.
2. The three stars represent the three pillars of central banking: price stability, stable banking system, and a
safe and reliable payments system. It may also be interpreted as a geographical representation of BSPs
equal concern for the impact of its policies and programs on all Filipinos, whether they are in Luzon, Visayas
or Mindanao.
Colors
1. The blue background signifies stability.
2. The stars are rendered in gold to symbolize wisdom, wealth, idealism, and high quality.
3. The white color of the eagle and the text for BSP represents purity, neutrality, and mental clarity.
Font or Type Face
Non-serif, bold for BANGKO SENTRAL NG PILIPINAS to suggest solidity, strength, and stability. The use of
non-serif fonts characterized by clean lines portrays the no-nonsense professional manner of doing business
at the BSP.
Shape
Round shape to symbolize the continuing and unending quest to become an excellent monetary authority
committed to improve the quality of life of Filipinos. This round shape is also evocative of our coins, the
basic units of our currency.

The BSP Main Complex

The BSP Main Complex in Manila houses the offices of the Governor, the Monetary Board and the different
operating departments/ offices. The Complex has several buildings, namely: 5-Storey building, Multi-storey
building, the EDPC building and the BSP Money Museum, which showcases the Bank's collection of
currencies.

The BSP Security Plant Complex

The Security Plant Complex which is located in Quezon City houses a banknote printing plant, a securities
printing plant, a mint and a gold refinery. The banknote printing plant and the mint take care of producing
currency notes and coins, respectively.

History of the Bank

A group of Filipinos had conceptualized a central bank for the Philippines as early as 1933. It came up with
the rudiments of a bill for the establishment of a central bank for the country after a careful study of the
economic provisions of the Hare-Hawes Cutting bill, the Philippine independence bill approved by the US
Congress.
During the Commonwealth period (1935-1941), the discussion about a Philippine central bank that would
promote price stability and economic growth continued. The countrys monetary system then was
administered by the Department of Finance and the National Treasury. The Philippines was on the exchange
standard using the US dollarwhich was backed by 100 percent gold reserveas the standard currency.
In 1939, as required by the Tydings-McDuffie Act, the Philippine legislature passed a law establishing a
central bank. As it was a monetary law, it required the approval of the United States president. However,
President Franklin D. Roosevelt disapproved it due to strong opposition from vested interests. A second law
was passed in 1944 during the Japanese occupation, but the arrival of the American liberalization forces
aborted its implementation.
Shortly after President Manuel Roxas assumed office in 1946, he instructed then Finance Secretary Miguel
Cuaderno, Sr. to draw up a charter for a central bank. The establishment of a monetary authority became
imperative a year later as a result of the findings of the Joint Philippine-American Finance Commission
chaired by Mr. Cuaderno. The Commission, which studied Philippine financial, monetary and fiscal problems
in 1947, recommended a shift from the dollar exchange standard to a managed currency system. A central
bank was necessary to implement the proposed shift to the new system.
Immediately, the Central Bank Council, which was created by President Manuel Roxas to prepare the charter
of a proposed monetary authority, produced a draft. It was submitted to Congress in February1948. By June
of the same year, the newly-proclaimed President Elpidio Quirino, who succeeded President Roxas, affixed
his signature on Republic Act No. 265, the Central Bank Act of 1948. The establishment of the Central Bank
of the Philippines was a definite step toward national sovereignty. Over the years, changes were introduced
to make the charter more responsive to the needs of the economy. On 29 November 1972, Presidential
Decree No. 72 adopted the recommendations of the Joint IMF-CB Banking Survey Commission which made a
study of the Philippine banking system. The Commission proposed a program designed to ensure the
systems soundness and healthy growth. Its most important recommendations were related to the objectives
of the Central Bank, its policy-making structures, scope of its authority and procedures for dealing with
problem financial institutions.
Subsequent changes sought to enhance the capability of the Central Bank, in the light of a developing
economy, to enforce banking laws and regulations and to respond to emerging central banking issues. Thus,
in the 1973 Constitution, the National Assembly was mandated to establish an independent central

monetary authority. Later, PD 1801 designated the Central Bank of the Philippines as the central monetary
authority (CMA). Years later, the 1987 Constitution adopted the provisions on the CMA from the 1973
Constitution that were aimed essentially at establishing an independent monetary authority through
increased capitalization and greater private sector representation in the Monetary Board.
The administration that followed the transition government of President Corazon C. Aquino saw the turning
of another chapter in Philippine central banking. In accordance with a provision in the 1987 Constitution,
President Fidel V. Ramos signed into law Republic Act No. 7653, the New Central Bank Act, on 14 June 1993.
The law provides for the establishment of an independent monetary authority to be known as the Bangko
Sentral ng Pilipinas, with the maintenance of price stability explicitly stated as its primary objective. This
objective was only implied in the old Central Bank charter. The law also gives the Bangko Sentral fiscal and
administrative autonomy which the old Central Bank did not have. On 3 July 1993, the New Central Bank Act
took effect.

Overview of Functions and Operations

Objectives
The BSPs primary objective is to maintain price stability conducive to a balanced and sustainable economic
growth. The BSP also aims to promote and preserve monetary stability and the convertibility of the national
currency.

Responsibilities
The BSP provides policy directions in the areas of money, banking and credit. It supervises operations of
banks and exercises regulatory powers over non-bank financial institutions with quasi-banking functions.
Under the New Central Bank Act, the BSP performs the following functions, all of which relate to its status as
the Republics central monetary authority.

Liquidity Management. The BSP formulates and implements monetary policy aimed at influencing
money supply consistent with its primary objective to maintain price stability.

Currency issue. The BSP has the exclusive power to issue the national currency. All notes and
coins issued by the BSP are fully guaranteed by the Government and are considered legal tender for
all private and public debts.

Lender of last resort. The BSP extends discounts, loans and advances to banking institutions for
liquidity purposes.

Financial Supervision. The BSP supervises banks and exercises regulatory powers over non-bank
institutions performing quasi-banking functions.

Management of foreign currency reserves. The BSP seeks to maintain sufficient international
reserves to meet any foreseeable net demands for foreign currencies in order to preserve the
international stability and convertibility of the Philippine peso.

Determination of exchange rate policy. The BSP determines the exchange rate policy of the
Philippines. Currently, the BSP adheres to a market-oriented foreign exchange rate policy such that
the role of Bangko Sentral is principally to ensure orderly conditions in the market.

Other activities. The BSP functions as the banker, financial advisor and official depository of the

Government, its political subdivisions and instrumentalities and government-owned and -controlled
corporations.
SECTION 48. The Peso. The unit of monetary value in the Philippines is the "peso," which is represented
by the sign "P."
The peso is divided into one hundred (100) equal parts called "centavos," which are represented by the sign
"c.

Monetary Operations under an Interest Rate Corridor (IRC)

Framework

Monetary operations refer to the buying/selling of

government securities, lending/borrowing against
underlying assets as collateral, acceptance of fixedterm deposits, foreign exchange swaps, and the use
of other monetary instruments of the Bangko Sentral
aimed at influencing the underlying demand and
supply conditions for central bank money.
On 3 June 2016, the BSP formally adopted an
interest rate corridor (IRC) system as a framework
for conducting its monetary operations. The IRC is a
system for guiding short-term market rates towards
the BSP policy interest rate which is the overnight
reverse repurchase (RRP) rate. It consists of a rate
at which the central bank (CB) lends to banks
(typically an overnight lending rate) and a rate at
which it takes deposits from them (deposit rate). In a
standard corridor, the lending rate will be above the
CB target/policy rate (thereby forming an upper
bound for short-term market rates), and the deposit
rate will be below the CB rate (thereby forming the
lower bound).
Related info:

Press statement on IRC System

Primer on Monetary Operations under

the IRC System

1. Open Market Operations (OMO)

Reverse Repurchase/Repurchase transactions

In a repurchase transaction, the BSP buys government securities (GS) from a bank with a
commitment to sell them back at a specified future date at a predetermined rate, resulting in an
expansionary effect on liquidity. Conversely, in a reverse repurchase (RRP) operation, the BSP also
acts as the seller of GS and the banks payment to the BSP has a contractionary effect on liquidity.
The interest rate for the overnight RRP facility signals the monetary policy stance and serves as the
BSP s primary monetary policy instrument. The RRP facility is offered to qualified counterparties
daily using a fixed-rate and full-allotment method, where individual bidders are awarded a portion
of the total offered amount depending on their bid size.

Outright purchases and sales of securities

An outright contract involves direct purchase/sale of government securities by the BSP from/to the
market for the purpose of increasing/decreasing money supply on a more permanent basis. In such
a transaction, the parties do not commit to reverse the transaction in the future, creating a more
permanent effect on the banking systems level of money supply.

Foreign exchange swaps

Foreign exchange swaps refer to transactions involving the actual exchange of two currencies
(principal amount only) on a specific date at a rate agreed on the deal date (the first leg), and a
reverse exchange of the same two currencies at a date further in the future (the second leg) at a
rate (different from the rate applied to the first leg) agreed on deal date.

2. Acceptance of term deposits

The BSP, like other central banks, offers term deposits as one of the monetary tools to absorb liquidity. In
November 1998, the BSP offered the Special Deposit Accounts (SDA) to banks and later expanded the
access in April 2007 to trust entities of banks and non-bank financial institutions. With the adoption of the
IRC system in 2016, the SDA facility was replaced by the term deposit auction facility (TDF).

Term Deposit Auction Facility (TDF)

The TDF is a liquidity absorption facility used by the BSP for liquidity management. Counterparties
are asked to submit bids (volume and rate) for term placements with the BSP. The BSP will initially
offer two tenorsseven days and 28 daysin its term deposit auction. The possibility of offering
longer tenors will be evaluated going forward, depending on the liquidity needs and preferences of
the market.

Auction Schedule:

Latest Auction Result:

Historical Auction Results:

3. Standing Liquidity Facilities

Q2 and Q3 2016

Release date: 29 June 2016

Download

The BSP offers standing liquidity (lending and deposit) windows to provide or absorb liquidity at the
initiative of the counterparty. These standing overnight facilities are available on demand to qualified
counterparties during BSP business hours. The two standing facilities that form the upper and lower bound
of the corridor are set at 50 basis points (bps) around the policy rate (the overnight RRP rate under the
new IRC structure).

Overnight Deposit Facility

The standing overnight deposit facility will absorb any residual system liquidity to prevent market
interest rates from falling below the corridor. Interest rate for the O/N deposit facility is the RRP
rate minus 50 bps (0.50 percentage point). The interest rate for the O/N deposit facility serves as a
floor for the O/N interbank rate.

Overnight Lending Facility

The standing overnight lending facility provides collateralized overnight funding to BSP
counterparties to clear end-of-day imbalances. Interest rate for the O/N lending facility is the RRP
rate plus 50 bps (0.50 percentage point). The interest rate for the O/N lending facility serves as a
ceiling for the O/N interbank rate.