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Paeng walks amongst us still

(Article published in the Nov 26, 2008 issue of Manila Standard Today)

He would have been only seventy (70) last 05 August; instead, it shall be two (2) years this 30 November since family and friends sobbed their last good-byes at the foot of the brightly-lit altar of Sanctuario de San Antonio even as outside drops of early morning dew started silently alighting on the tender leaves of the ancient trees of dark McKinley Road that was damp with the remnant showers of the storm that had passed in the night. Many storms have since come and gone. The trees on Mckinley have shed and grown their leaves a few times over, but as we brace ourselves against the turmoil already shaking our neighbors, it seems “Thanks, Paeng” instead of “Goodbye” was the appropriate thing to say.

Just two weeks ago, on the 14th of this month, BSP Governor Say Tetangco welcomed the members of the Philippine Economic Society attending its 46th Annual Meeting at the Bangko Sentral with the following statement of what the BSP is doing in our defense:

“For us at the BSP, vigilant and sound policymaking necessitates keeping a watchful eye on price developments, since price stability is the BSP’s primary mandate.  The BSP will therefore remain vigilant against the threats to inflation and inflation expectations.  To the extent that risks to inflation are reduced by easing supply-side pressures, we will have more flexibility in determining appropriate monetary policy settings that will promote price stability that  is conducive to balanced and sustainable economic growth.  We will watch closely for future signs of easing inflationary pressures as well for price pressures that are still in the pipeline, since their pass-through is expected to continue for sometime.  The challenge is to ensure that monetary policy settings are calibrated as appropriate… so that there is sufficient confidence that inflation would be on a declining path over the near- and medium-term to keep inflation expectations well anchored. 
 
At the same time, the BSP also remains strongly committed to provide necessary liquidity in the financial system for banks that may need funds…to ensure the normal functioning of credit and financial markets.”
 










     

A little over three years earlier, on 04 March 2005, Paeng Buenaventura was saying the same thing to the same group at the same place on the same occasion. “Our key task,” said Paeng in what turned out to be his last public address before his final confrontation with his illness, “is to sustain prudent monetary policy geared towards price stability which is the central mandate of the Bangko Sentral. Our shift to formal inflation targeting fully commits the BSP to this objective...

In the financial sector reform area, a central focus is to bring the banking sector to international standards and provide it with a sound supervisory framework to meet the modern challenges of the financial environment…

In particular, we are strengthening our regulatory policies in line with key international standards like the Basle framework for supervisory practices and on capital adequacy and the IAS/IFRS accounting standards and reporting mechanisms on financial transactions. No less critical, we are enhancing our institutional capacity to make sure these standards are being met.”

Nothing new, really.  Paeng was mostly only reiterating what he had already said in his first public address as Governor delivered at the Joint General Membership Meeting MAP-BAP-ECOP-FINEX-MBC-PCCI on the 20th of July, 1999. Paeng at that time told his audience what course he is plotting for the ship he was then steering, as follows:

“In sum, the BSP will pursue a two-fold mission. The first is to guard and maintain stability. The second is to lead and drive the development of the banking and financial system towards greater strength, sophistication, competitiveness, and responsiveness to the requirements of the country’s growth. Globalization, liberalization, and technological developments are going on at a rapid pace, and confront us with threats as well as opportunities. We must be fast enough to keep up with that pace, strong enough to meet the threats, and smart enough to avail ourselves of the opportunities.”

As if by strange coincidence, Gov. Say himself, when he delivered his own inaugural speech on 04 July 2005, harped on the same themes.

On price stability, Gov. Say said “We shall… continue to adhere to inflation targeting as our monetary framework. Inflation targeting emerged at that point where monetary targeting started to fade. Since the implementation of inflation targeting in January 2002, we have seen how rigorous economic analysis, discipline in the conduct of monetary policy and greater transparency in the thinking of the monetary authorities have contributed to reduced gyrations in consumer prices. The dynamics of inflation expectations has been largely anchored in the market’s appreciation of the BSP’s explanation of the factors driving inflation and what the BSP intends to do to address them…”

And on keeping the financial system sound, he resolved: “We shall sustain the Bangko Sentral’s reform strategy on cleaning up banks’ balance sheets, addressing remaining weaknesses in managing risks, and ensuring that our prudential regulatory standards are elevated to international benchmarks. We shall also continue to coordinate with other government agencies and the private sector in installing the remaining infrastructural requirements of a well-functioning capital market that would diversify our sources of funds and reduce our vulnerability to various shocks.”

Why do our good governors keep saying the same thing over and over, like the refrain of a never ending song?. The reason, in my view, is that central bank governors are like the pilots of commercial flights. They are expected to talk to you only when you board and when you disembark. In between, he makes sure your flight is both on course and comfortable. The more unobtrusive he is, the better he is doing his job.  Paeng himself describes a governor’s role in the same vein.  In his speech at the aforementioned joint meeting of MAP-BAP-ECOP-FINEX-MBC-PCCI, Paeng said:

“… now, for the good news and the bad news. The bad news is, I have nothing spectacular to say. That is unforgivable for a luncheon speaker. The good news is, I have nothing spectacular to say. That is what the business and banking communities want to hear from their central bank Governor.

No one wants to hear spectacular news from his central bank, just as no one wants to hear it from his doctor. The Bangko Sentral’s overriding concern is stability, just as your doctor’s primary concern is your health. And health and stability have one thing in common: they are no big deal, and you take them for granted, until you stand to lose them.”

To our sadness, Paeng’s health had gone; but, to our good fortune the stability he strongly strove for remains. And will no doubt continue. His worthy successor committed: “In my earlier interviews with the media, I have stressed one important point that will be the hallmark of my stewardship. We will not try to reinvent the wheel. Instead, we shall strive to continually improve it and keep it running more efficiently. Our vision is to see that it brings us to where we want to go.”

As we hope for the best and prepare for the worst in the months to come, it is comforting to hear our pilot speaking:“…while we deliver bold strokes to the market, we shall not throw caution to the wind. We shall be fully accountable for our efforts to keep prices stable and the banking system sound, but we shall also continue to inform the markets as necessary about the boundaries of what we can do. With this, the nation can be assured the BSP shall keep its end of the contract. Those words are not Paeng’s; they are Gov. Say’s.
 

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