Market unfazed as BSP says Espenilla to take ‘intermittent medical leaves’

By Melissa Luz T. Lopez
Senior Reporter
BANGKO SENTRAL ng Pilipinas (BSP) Governor Nestor A. Espenilla, Jr. has extended his medical leave until the end of the month, adding that he could take “intermittent” leaves in the future.
Observers said, though, that this did not worry the market.
In an advisory, the BSP’s Corporate Affairs Office announced on Wednesday that Mr. Espenilla will be on medical leave until Oct. 26, marking the fifth straight week that he would be out of office.
“Thereafter, he may be taking intermittent medical leaves. During his medical leaves, BSP deputy governors will be taking turns as officer-in-charge in accordance with established BSP business continuity protocol,” the statement read.
“In the meantime, the BSP team stays steadfast in pursuing the Continuity ++ agenda while Governor Espenilla is completing his treatment.”
The central bank chief was diagnosed with early-stage tongue cancer in November 2017. Mr. Espenilla, now 60, said in February that he was declared cancer-free after surgery and radiation therapy.
Analysts said they believe that markets are unfazed by Mr. Espenilla’s health issues.
Traders sought for comment said there was “no observable impact” on financial markets following the news.
“[T]here is no change in views regarding BSP’s monetary policy,” one currency trader pointed out.
Policy direction remains clear, according to industry observers.
“Generally it’s very difficult to comment on the issue given the sensitivity of the matter. However, I do believe that for as long as BSP provides a clear, consistent and decisive communications strategy, the market will carry on with their business and look to the speedy recovery of the Governor,” said Nicholas Antonio T. Mapa, senior economist at ING Bank NV Manila.
“BSP’s adherence to a consistent and forceful hawkish stance has helped calm markets of late and rendered relative stability even as the Governor remains away. Consistent messaging will be key in maintaining market stability and the deputies will continue to hold the down the fort for as long as the Governor needs to get back to good health.”
Central bank officials have kept a hawkish stance as they announced another 50 basis points increase in policy rates last month, which was a show of force to rein in price expectations as inflation surged to a fresh nine-year high.
Monetary Board Member Felipe M. Medalla, however, said on Tuesday that the BSP may pause its tightening cycle should inflation momentum ease starting this month.
The peso has been seeing some reprieve this week as it returned to the P53 level versus the dollar level, which traders attributed to negative sentiment on Wall Street.
The Philippine Stock Exchange index has also been seeing sustained foreign outflows, with investors wary about trade tensions between the United States and China and, recently, the worsening political row between Washington and Saudi Arabia.
“At this point, market reaction regarding the governor’s health remains minimal, luckily, because BSP already laid their immediate plans out in the last meeting, and, as far as the public knows, the officers left in charge during his absence remain in line with Espenilla’s intended direction,” said Rens V. Cruz II, an analyst with Regina Capital Development Corp.
“However, investors will begin raising issues if the current macroeconomic woes (high inflation, currency depreciation, current account deterioration) persist and BSP will be delayed in responding with tightening policy measures.”
BSP Deputy Governor Chuchi G. Fonacier told reporters recently that monetary authorities have been able to communicate with Mr. Espenilla daily even during his leave. He had also assured that his new round of treatment has been “progressing very well.”
Also yesterday, the BSP governor said via WhatsApp messages that the central bank is piloting the use of digital tools for its bank supervision and consumer protection services through the RegTech for Regulators Accelerator.
To be rolled out are chatbots which will automate the handling of complaints from the public which are sent via mobile phone message and online platforms, which comes at a time of an aggressive push towards electronic transactions.