BSP extends regulatory relief to banks amid the Middle East conflict: a new dimension of Central Banking?

PHILIPPINES - Report 24 Jun 2026 by Diwa Guinigundo

In providing a temporary regulatory relief to the banks, this Bangko Sentral ng Pilipinas' (BSP) regulatory response represents a departure from the conventional approach adopted by most regional central banks by combining monetary policy with targeted prudential and supervisory relief for banks under its supervision.

BSP Memorandum No. 2026-027 provides temporary relief on the mark-to-market valuation of government securities, as well as the broader package of regulatory measures implemented under Memorandum No. M-2026-014 following the declaration of a State of National Energy Emergency. It places these measures within the context of the BSP's earlier pandemic response, highlighting the continuity in its crisis-management framework.

The BSP's approach differs from those of other Asian central banks. While many relied primarily on monetary policy to address inflationary and financial market pressures, the BSP has adopted a more integrated strategy, combining monetary, macroprudential, and microprudential policies to safeguard financial stability.

There could be some policy trade-offs inherent in regulatory forbearance. These include the potential for moral hazard, delayed risk recognition, and weakened market discipline. While the BSP's response reflects an innovative and proactive interpretation of its financial stability mandate, its long-term success will depend on maintaining proportionality, preserving supervisory discipline, and ensuring that temporary relief measures remain exceptional, targeted, and time-bound.

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