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Before taking the top job at the Philippine central bank, Nestor Espenilla Jr was known for his toughness on financial crime – now he says he is enabling the banking system to go from strength to strength… providing it sticks to the rules.
When Nestor Espenilla Jr stepped up to the top job at Bangko Sentral Ng Pilipinas (BSP), the central bank of the Philippines, on July 3 last year, he came with a certain reputation.
Nesting, as they call him locally, had spent 36 years at the bank, many of them devoted to being extremely tough on financial crime.
Espenilla smiles when reminded of the reputation. He smiles a lot, a cheerful and quietly-spoken man whose gentle demeanour is a wholly inaccurate reflection of his time as an enforcement and surveillance banker. Even when our interview on an upper floor of a Manila hotel is interrupted by a mild earthquake, he is still smiling.
“I look at that [time] as something positive for me as governor now,” he says. “The value to the governor of understanding what’s really the strength and weakness of the banking system informs my other duties, in running monetary policy, for example.”
And despite some trepidation in the banking sector – he has previously hit RCBC with fines, caused LBC Development Bank and Banco Filipino to close outright and remains head of the anti-money laundering council for the country – Espenilla depicts himself as someone supportive of the banking sector, even accommodating, and quite happy with its health.
“Right now, I am willing to lower the reserve requirement,” he says. “We have started that long journey.”
Admittedly, at 20%, Philippine banks face one of the highest reserve requirements in the world, but still, any reduction in the rate is a show of support. “I rest comfortable that even as we lower the reserve requirement, banks will continue to behave prudently because we have put in place beforehand the right risk controls,” he says.
“We have altered the way the banks think about managing risk and we have improved their governance. Banks will behave. Even if you put liquidity in front of them, they will not go crazy and lend to anyone who can sign a piece of paper.
“Philippine banks today are very different from the banks of 10 years ago in terms of their behaviour,” he says.
