Policy makers to unwind stimulus measures with ‘delicate timing’

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POLICY MAKERS in Asia discussed the need to be careful in exiting stimulus measures fired off in recent months amid the coronavirus pandemic. — BW FILE PHOTO

OFFICIALS FROM several Asian economies discussed strategies in unwinding stimulus measures fired off amid the coronavirus disease 2019 (COVID-19) pandemic to ensure the stability of their respective financial systems.

In a recent Regional Consultative Group for Asia (RCGA) meeting of the Basel-based Financial Stability Board (FSB) chaired by Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno, policy makers from 17 jurisdictions in Asia discussed initiatives to ensure financial stability as the pandemic crisis stretches on.

“With the recent prognosis of a global recovery that play out well into 2021 and likely to be at a different pace across jurisdictions, the members weighed the delicate timing of any exit from expansionary policies and other regulatory relief measures,” the central bank said in a statement on Saturday.

Mr. Diokno earlier said the BSP will be careful in unwinding the monetary policy measures it employed in recent months to support the virus-stricken economy to ensure there will be no repercussions.

In the RCGA meeting, Mr. Diokno said authorities have learned from the 1997 Asian Financial Crisis and the Global Financial Crisis in 2007 and have, in recent years, ensured their financial systems have ample liquidity to serve as buffers versus any headwinds.

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As the coronavirus pandemic continues to affect economies across the world, Mr. Diokno said assessing financial stability should remain a priority.

“[M]anaging systemic risk is at its most urgent…[as] no one in this meeting doubts that the financial market will be affected, at some point and in some form,” he said at the biannual meeting held online.

Officials have acknowledged that in the Philippines, systemic risks — or the potential for a company-level event to trigger severe instability in an entire industry or economy — is a possibility amid the global recession.

Mr. Diokno has said the Financial Stability Policy Committee has been monitoring several factors such as the country’s debt-to-gross domestic product ratio and the stability of the banking system, among others, to assess the possibility of systemic risks.

“We do not have a ready playbook for addressing the financial market spillovers but we are quite sure that risk aversion abounds and incomes have been lost. That only means that much more work is ahead of us and I encourage all the participants to keep our communication channels open,” he said at the meeting.

Mr. Diokno also said challenges to cross-border payments continue and need to be addressed.

Together with other consultative groups for the Americas, Commonwealth of Independent States, Europe, Middle East and North Africa, and Sub-Saharan Africa region, the RCGA was created by the FSB to further the standard-setting body’s dialogue and implementation of the global financial stability agenda. — LWTN

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