Bangko Sentral ng Pilipinas Governor Felipe Medalla (File photo courtesy of BSP) 

MANILA – Bangko Sentral ng Pilipinas (BSP) Governor Felipe Medalla cited the importance of reassessing the regulatory framework to encourage additional lending towards climate change mitigation, as he stressed the impact of climate change on the economy.

In his speech during the launch of the BSP Sustainable Central Banking (SCB) Strategy at the central bank main office in Manila on Thursday, Medalla said climate change could affect the supply of food, among others, and this, in turn, impacts on inflation.

He said the central bank needs to help prevent the occurrence of second-round effects or the resulting impact of supply constraints, among others, before this becomes permanent.

This, he said, is where the regulatory framework review is needed to ensure that banks’ capitalization is commensurate to the risks they will face once they lend to vulnerable sectors or projects.

“Even just from the point of view of our standard regulatory approach we have to make some modifications on how we define credit risks, default risks, and all the financial risks,” Medalla said.

“Climate action is a whole of society undertaking and the central bank, the BSP, could only do so much but it will do what it needs. But because we can only do so much that’s why we call on everyone’s support to have implement the sustainable central banking program and of course the rest of the society outside central banking must contribute as well," he added.

BSP Deputy Governor Chuchi Fonacier, meanwhile, said the 11-point SCB Strategy is aimed at ensuring a more sustainable future in the financial system.

“Besides being sound and stable, our desire is to have banks and financial institutions that are mindful of the environment and the pressing issues and threats of climate change to price and financial stability,” she said, noting that the BSP vows to be the role mode for regulated institutions.

She said the central bank, under the SCB Strategy, “will foster environmentally responsible and sustainable policies and work practices.”

She said the BSP will also integrate environmental, social, and governance (ESG) principles in the central bank’s key functions and operations.

“The 11-point SCB Strategy embodies the BSP’s roles as an enabler, mobilizer, and doer in advocating sustainability throughout the financial system,” she added. (PNA)