CHAPTER III

GUIDING PRINCIPLES OF MONETARY ADMINISTRATION

BY THE BANGKO SENTRAL
ARTICLE I - DOMESTIC MONETARY STABILIZATION
SECTION 61. Guiding Principle. The Monetary Board hall
! endea"or to control any e#panion or contraction in $onetary aggregate
!! %hich i pre&udicial to the attain$ent or $aintenance o' price ta(ility.
SECTION 6). Po%er to *e+ne Ter$. the Monetary Board hall
! 'or$ulate de+nition o' $onetary aggregate, credit and price and
! hall $a-e pu(lic uch de+nition and any change thereo'.
SECTION 6.. /ction 0hen /(nor$al Mo"e$ent Occur in the Monetary /ggregate,
Credit, or Price 1e"el. 0hene"er a(nor$al $o"e$ent in the $onetary
aggregate, in credit, or in price endanger the ta(ility o' the Philippine econo$y
or i$portant ector thereo', the Monetary Board hall2
(a) take such e!e"#a$ !easues as are appropriate and within the powers granted to the Monetary
Board and the Bangko Sentral under the provisions of this Act; and
(b) su%!#t t& the Pes#"e't of the Philippines and the Congress and !ake public a "eta#$e" e(&t
which shall include as a !ini!u! a description and analysis of"
(#) the causes of the rise or fall of the !onetary aggregates of credit or of prices;
($) the e)te't to which the cha'*es in the !onetary aggregates in credit or in prices have been
reflected in changes in the level of do!estic output e!ploy!ent wages and econo!ic activity in general
and the 'atue a'" s#*'#+#ca'ce &+ a', such cha'*es; and
(%) the !easues -h#ch the Monetary B&a" has take' and the other !onetary fiscal or
a"!#'#stat#.e !easues which it ec&!!e'"s t& %e a"&(te"&
Whenever the $onetary aggregate, or the le"el o' credit,
! increases or decreases (y more than +'teen percent (15%),
! or the cost of living index increae (y more than ten percent (10%), in
relation to the le"el e#iting at the end o' the correponding $onth o' the
preceding year,
! or e"en though any o' thee 3uantitati"e guideline ha"e not (een reached
%hen in it &udg$ent the circu$tance o %arrant,
the Monetary Board shall submit the reports $entioned in thi ection,
and shall state therein whether, in the opinion o' the Board, said changes
in the $onetary aggregate, credit or cot o' li"ing repreent a threat to the
stability o' the hilippine economy or of important sectors thereof!
'he Monetary Board shall continue to sub!it periodic reports to the President of the Philippines and to
Congress until it considers that the !onetary credit or price disturbances have disappeared or have been
ade(uately controlled&
ARTICLE II - INTERNATIONAL MONETARY STABILIZATION
S)C'*+, -.& *nternational Monetary Stabili/ation& 0 'he Bangko Sentral shall e1ercise its powers under this
Act to preserve the international value of the peso and to !aintain its convertibility into other freely
convertible currencies pri!arily for although not necessarily li!ited to current pay!ents for foreign trade
and invisibles&
S)C'*+, -2& *nternational 3eserves& 0 *n order to !aintain the international stability and convertibility of
the Philippine peso the Bangko Sentral shall !aintain international reserves ade(uate to !eet any
foreseeable net de!ands on the Bangko Sentral for foreign currencies&
*n 4udging the ade(uacy of the international reserves the Monetary Board shall be guided by the
prospective receipts and pay!ents of foreign e1change by the Philippines& 'he Board shall give special
attention to the volu!e and !aturity of the Bangko Sentral5s own liabilities in foreign currencies to the
volu!e and !aturity of the foreign e1change assets and liabilities of other banks operating in the Philippines
and insofar as they are known or can be esti!ated the volu!e and !aturity of the foreign e1change assets
and liabilities of all other persons and entities in the Philippines&
S)C'*+, --& Co!position of the *nternational 3eserves& 0 'he international reserves of the Bangko Sentral
!ay include but shall not be li!ited to the following assets"
(a) gold; and
(b) assets in foreign currencies in the for! of" docu!ents and instru!ents custo!arily e!ployed for the
international transfer of funds; de!and and ti!e deposits in central banks treasuries and co!!ercial banks
abroad; foreign govern!ent securities; and foreign notes and coins&
'he Monetary Board shall endeavor to hold the foreign e1change resources of the Bangko Sentral in freely
convertible currencies; !oreover the Board shall give particular consideration to the prospects of continued
strength and convertibility of the currencies in which the reserve is !aintained as well as to the anticipated
de!ands for such currencies& 'he Monetary Board shall issue regulations deter!ining the other
(ualifications which foreign e1change assets !ust !eet in order to be included in the international reserves
of the Bangko Sentral&
'he Bangko Sentral shall be free to convert any of the assets in its international reserves into other assets
as described in subsections (a) and (b) of this section&
S)C'*+, -6& Action 7hen the *nternational Stability of the Peso *s 'hreatened& 0 7henever the
international reserve of the Bangko Sentral falls to a level which the Monetary Board considers inade(uate to
!eet prospective net de!ands on the Bangko Sentral for foreign currencies or whenever the international
reserve appears to be in i!!inent danger of falling to such a level or whenever the international reserve is
falling as a result of pay!ents or re!ittances abroad which in the opinion of the Monetary Board are
contrary to the national welfare the Monetary Board shall"
(a) take such re!edial !easures as are appropriate and within the powers granted to the Monetary Board
and the Bangko Sentral under the provisions of this Act; and
(b) sub!it to the President of the Philippines and to Congress a detailed report which shall include as a
!ini!u! a description and analysis of"
(#) the nature and causes of the e1isting or i!!inent decline;
($) the re!edial !easures already taken or to be taken by the Monetary Board;
(%) the !onetary fiscal or ad!inistrative !easures further proposed; and
(.) the character and e1tent of the cooperation re(uired fro! other govern!ent agencies for the successful
e1ecution of the policies of the Monetary Board&
*f the resultant actions fail to check the deterioration of the reserve position of the Bangko Sentral or if the
deterioration cannot be checked e1cept by chronic restrictions on e1change and trade transactions or by
sacrifice of the do!estic ob4ectives of a balanced and sustainable growth of the econo!y the Monetary
Board shall propose to the President with appropriate notice of the Congress such additional action as it
dee!s necessary to restore e(uilibriu! in the international balance of pay!ents of the Philippines&
'he Monetary Board shall sub!it periodic reports to the President and to Congress until the threat to the
international !onetary stability of the Philippines has disappeared&
HAPTER I/
INSTRUMENTS OF BANGKO SENTRAL ACTION
ARTICLE I - GENERAL CRITERION
S)C'*+, -8& Means of Action& 0 *n order to achieve the pri!ary ob4ective of price stability the Monetary
Board shall rely on its !oral influence and the powers granted to it under this Act for the !anage!ent of
!onetary aggregates&
ARTICLE II - OPERATIONS IN GOLD AND FOREIGN E0CHANGE
S)C'*+, -9& Purchases and Sales of :old& 0 'he Bangko Sentral !ay buy and sell gold in any for! sub4ect
to such regulations as the Monetary Board !ay issue&
'he purchases and sales of gold authori/ed by this section shall be !ade in the national currency at the
prevailing international !arket price as deter!ined by the Monetary Board&
S)C'*+, 6;& Purchases and Sales of <oreign )1change& 0 'he Bangko Sentral !ay buy and sell foreign
notes and coins and docu!ents and instru!ents of types custo!arily e!ployed for the international
transfer of funds& 'he Bangko Sentral !ay engage in future e1change operations&
'he Bangko Sentral !ay engage in foreign e1change transactions with the following entities or persons only"
(a) banking institutions operating in the Philippines;
(b) the :overn!ent its political subdivisions and instru!entalities;
(c) foreign or international financial institutions;
(d) foreign govern!ents and their instru!entalities; and
(e) other entities or persons which the Monetary Board is hereby e!powered to authori/e as foreign
e1change dealers sub4ect to such rules and regulations as the Monetary Board shall prescribe&
*n order to !aintain the convertibility of the peso the Bangko Sentral !ay at the re(uest of any banking
institution operating in the Philippines buy any (uantity of foreign e1change offered and sell any (uantity of
foreign e1change de!anded by such institution provided that the foreign currencies so offered or
de!anded are freely convertible into gold or =nited States dollars& 'his re(uire!ent shall not apply to
de!ands for foreign notes and coins&
'he Bangko Sentral shall effect its e1change transactions between foreign currencies and the Philippine peso
at the rates deter!ined in accordance with the provisions of Section 6. of this Act&
S)C'*+, 6#& <oreign Asset Position of the Bangko Sentral& 0 'he Bangko Sentral shall endeavor to !aintain
at all ti!es a net positive foreign asset position so that its gross foreign e1change assets will always e1ceed
its gross foreign liabilities& *n the event that the e(uivalent a!ount in pesos of the foreign e1change
liabilities of the Bangko Sentral e1ceed twice the e(uivalent a!ount in pesos of the foreign e1change assets
of the bank the Bangko Sentral shall within si1ty (-;) days fro! the date the li!it is e1ceeded sub!it a
report to the Congress stating the origin of these liabilities and the !anner in which they will be paid&
S)C'*+, 6$& )!ergency 3estrictions on )1change +perations& 0 *n order to achieve the pri!ary ob4ective
of the Bangko Sentral as set forth in Section % of this Act or protect the international reserves of the
Bangko Sentral in the i!!inence of or during an e1change crisis or in ti!e of national e!ergency and to
give the Monetary Board and the :overn!ent ti!e in which to take constructive !easures to forestall
co!bat or overco!e such a crisis or e!ergency the Monetary Board with the concurrence of at least five
(2) of its !e!bers and with the approval of the President of the Philippines !ay te!porarily suspend or
restrict sales of e1change by the Bangko Sentral and !ay sub4ect all transactions in gold and foreign
e1change to license by the Bangko Sentral and !ay re(uire that any foreign e1change thereafter obtained
by any person residing or entity operating in the Philippines be delivered to the Bangko Sentral or to any
bank or agent designated by the Bangko Sentral for the purpose at the effective e1change rate or rates"
Provided however 'hat foreign currency deposits !ade under 3epublic Act ,o& -.$- shall be e1e!pt fro!
these re(uire!ents&
S)C'*+, 6%& Ac(uisition of *nconvertible Currencies& 0 'he Bangko Sentral shall avoid the ac(uisition and
holding of currencies which are not freely convertible and !ay ac(uire such currencies in an a!ount
e1ceeding the !ini!u! balance necessary to cover current de!ands for said currencies only when and to
the e1tent that such ac(uisition is considered by the Monetary Board to be in the national interest& 'he
Monetary Board shall deter!ine the procedures which shall apply to the ac(uisition and disposition by the
Bangko Sentral of foreign e1change which is not freely utili/able in the international !arket&
S)C'*+, 6.& )1change 3ates& 0 'he Monetary Board shall deter!ine the e1change rate policy of the
country&
'he Monetary Board shall deter!ine the rates at which the Bangko Sentral shall buy and sell spot e1change
and shall establish deviation li!its fro! the effective e1change rate or rates as it !ay dee! proper& 'he
Bangko Sentral shall not collect any additional co!!issions or charges of any sort other than actual
telegraphic or cable costs incurred by it&
'he Monetary Board shall si!ilarly deter!ine the rates for other types of foreign e1change transactions by
the Bangko Sentral including purchases and sales of foreign notes and coins but the !argins between the
effective e1change rates and the rates thus established !ay not e1ceed the corresponding !argins for spot
e1change transactions by !ore than the additional costs or e1penses involved in each type of transactions&
S)C'*+, 62& +perations with <oreign )ntities& 0 'he Monetary Board !ay authori/e the Bangko Sentral to
grant loans to and receive loans fro! foreign banks and other foreign or international entities both public
and private and !ay engage in such other operations with these entities as are in the national interest and
are appropriate to its character as a central bank& 'he Bangko Sentral !ay also act as agent or
correspondent for such entities&
=pon authority of the Monetary Board the Bangko Sentral !ay pledge any gold or other assets which it
possesses as security against loans which it receives fro! foreign or international entities&