History

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.
Objectives and Responsibilities
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.
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.

Advocacies
The BSP is deeply involved in various projects and activities aimed towards alleviating poverty,
contributing to the global fight against money laundering, increasing transparency of monetary
policy and improving the financial literacy of the public.
The BSP has declared microfinance as its flagship program for poverty alleviation in
Year 2000 and has since then played a key role in the development of sustainable
microfinance in the country. The BSP initiatives have focused on the policy and
regulatory environment, training and capacity building as well as on promotion and
advocacy.
In order to implement its continued commitment and support of the global fight against
money laundering, the BSP worked for the passage of the Anti-Money Laundering Act
and issued a number of measures to bring the Philippines' regulatory regime on money
laundering closer to international standards.
The BSP has been conducting public information campaigns in line with the effort to
increase public awareness on the role of the BSP in the economy and the financial system
and to further enhance the transparency of monetary policy.
The BSP has also taken a proactive stance in embarking on a consumer education
program that aims to improve the basic financial literacy of the public.
The BSP undertakes various bank-related initiatives to improve the remittance
environment and to channel remittances to productive undertakings. Through these
initiatives, the BSP intends to maximize the benefits of remittances aimed at: (1) ensuring
the smooth inflow of remittances, and (2) promoting their use for development by
channeling them to the financial sector so that these funds can be mobilized for lending
and other productive activities.