Continuity, intuition, and new style to guide incoming BSP governor » Manila Bulletin Business

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In a country in political flux, investors have come to rely on a predictable central bank in the Philippines. Now, with Governor Amando Tetangco handing over the reins to one of his deputies after 12 years, his successor wants to show he is no clone.

Nestor Espenilla

Expect policy continuity, but prepare for a new style and approach, said  Nestor Espenilla, 58, who takes over on July 3. “Nesting” – as he’s known to many – considers himself an intuitive leader as described by Malcolm Gladwell in his book ‘Blink,’ of which he is a fan. Gladwell argues that split-second decisions in complex situations can be as good as, or even better, than ones made under careful thought.

“Governor Tetangco is a consummate manager,’’ Espenilla said in an interview in Manila. “I’m very intuitive,” he said from his office, where portraits of women entrepreneurs hang on the wall, the main beneficiaries of a microfinance project he championed as a central banker.

“I respond to moments and situations, I trust my instincts,” he said. He balances that with the right dose of pragmatism, he said, having honed his skills at the central bank since the debt crisis in the 1980s.

A self-described libertarian, Espenilla will need to draw on those characteristics to manage a tough environment: he starts his six-year term with an insurgency in the south, an economy facing its first current-account deficit in 15 years and a currency that’s among the worst performers in Asia. The peso was little changed on Friday at 50.31 per US dollar.

He is also contending with the risk of capital outflows as the US raises interest rates. In Tetangco’s last policy meeting on Thursday, Bangko Sentral ng Pilipinas held its benchmark rate at a record low of 3 percent.

“While am delighted to succeed him, I know I have very big shoes to fill,” Espenilla said on Tuesday. Espenilla said his decision-making style isn’t a threat to a smooth transition and that his term will be marked by what he calls “continuity plus plus.”

“Nesting will provide continuity but knowing how bright he is, he will also look at the existing policies and find ways to improve them,” said Joey Macadaeg, president of United Coconut Planters Bank, who has known Espenilla since he was a straight-A student in grade school.

New Priorities

As head of banking supervision for more than a decade, Espenilla sees room for more reforms. He successfully pushed for a law that eased rules on foreign ownership of banks, required lenders to hold more capital and adopt stricter risk management.

He said his priorities include gradually lowering the amount of funds that banks must hold in reserves without compromising the inflation target, and deepening capital markets. He plans to further loosen currency restrictions.

“I look at it also as a trust game,” Espenilla said. “If you treat people like they can’t be trusted, they won’t be mindful of their responsibilities.”

Speculative behavior is more prevalent “in a space that’s not open,” he said, rewarding those who can deftly navigate the system.

One of Espenilla’s biggest challenges came last year when $81 million in stolen reserves from Bangladesh found their way to the Philippines, starting out in bank accounts at Rizal Commercial Banking Corp., then transferred to a couple of foreign exchange dealers who converted the money to pesos, and later to casinos, where the trail went cold.

Rizal Bank was slapped with a record 1 billion-peso ($20 million) fine and lenders were told to shape up.

Teresita Herbosa, chairman of the Securities and Exchange Commission, describes Espenilla’s regulatory strategy as proactive and preventive. He is a consensus builder but isn’t afraid to disagree, she said.

The only boy among five children, Espenilla joined the central bank as a debt analyst in 1981 after graduating magna cum laude in economics from the University of the Philippines. He juggled law school while working but knew after a year that he would have to choose one path. By then, he was considered talented enough to join Governor Jaime Laya on foreign trips, so the choice was easy.

Espenilla crunched numbers and wrote speeches for governors including Tetangco. His career flourished under Tetangco’s predecessor, Rafael Buenaventura, who promoted Espenilla three ranks to deputy governor from director.

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