Midterm Part 2
Topic Content: Strengthening Operational Resilience in Philippine Banking
I. Introduction
Operational resilience has become a cornerstone of financial stability in the Philippines,
especially in the wake of global disruptions such as the COVID-19 pandemic and
increasing cyber threats. The Bangko Sentral ng Pilipinas (BSP) has responded by issuing
new guidelines to ensure that supervised financial institutions (BSFIs) can withstand and
recover from operational shocks.
II. Featured News Article
Title: BSP Issues New Rules to Boost Banks’ Resilience
Source: Manila Standard
Date Published: November 6, 2024
Summary:
The BSP approved the “Guidelines on Operational Resilience” to enhance the ability of
banks and non-bank financial institutions to manage disruptions. These guidelines require
BSFIs to:
Identify critical operations vulnerable to disruption.
Set tolerance levels for service interruptions.
Integrate resilience into governance, risk management, and recovery planning.
Align with international standards such as the Basel Committee’s Principles for
Operational Resilience.
The framework will be implemented in phases, beginning with a self-assessment
questionnaire to help institutions identify gaps and prepare action plans.
III. Research Question
How will the BSP’s operational resilience guidelines affect the risk management
practices and service continuity of supervised financial institutions in the Philippines?
Based on the study of Rangachary Ravikumar and Paul Williams (2023,May 12).
The BSP is keen to implement the Basel Committee on Banking Supervision’s Principles
for Operational Resilience and has constituted a Technical Working Group to draft the
regulation and formulate a supervisory approach. The BSP has issued regulations on
various components relevant to the topic of operational resilience, but such regulations
need clarity and emphasis on the operational resilience principles which are separate and
distinct from the operational risk management and business continuity. Being an island
nation facing severe climate-related challenges, the business continuity preparedness of
the jurisdiction is perceived to be strong, thereby reducing the potential gap between the
extant regulatory framework and the required regulations to implement operational
resilience principles. Capacity of the supervisors in drafting a regulation on this topic of
emerging interest was augmented by the focused training program.
The research indicates, BSP Circular Number 1203 series of 2024. Operational
resilience is the ability of a BSFI to deliver critical operations through significant
operational disruption. This encompasses the BSFI's ability to identify and mitigate
threats and potential failure, plan, respond. restore, and learn from disruptive events to
minimize impact on delivery of critical operations through disruptions.
Critical operations include critical functions and involve activities, processes,
services and their relevant supporting assets the disruption of which could cause material
harm to the customers or to the continued operation or viability of the BSFI and/or its role
in the financial system. Supporting assets refer to people, technology, information, and
facilities necessary for the delivery of critical operations. These may include internal
process, IT systems, clearing and settlement facilities and outsourced services necessary
for the delivery of critical operations, among others. Determining whether a particular
operation is "critical" depends on the nature of operations of the BSFI and its role in the
financial system.
As shown by the study of Keisha Ta-Asan - The Philippine Star (June 29, 2025).
The Bangko Sentral ng Pilipinas (BSP) has released the proposed guidelines aimed at
enhancing how banks and financial institutions manage model-related risks to strengthen
operational resilience amid the increasing use of complex algorithms in the sector.
In a draft circular posted on its website, the central bank outlined the requirements
for BSP-supervised financial institutions (BSFIs) to establish a comprehensive framework
for model risk management (MRM), covering all stages of a model’s life cycle.
“Consequently, BSFIs are expected to establish and maintain a sound framework for the
effective management of model risk commensurate with their size, operational
complexity, risk profile, and extent of model usage,” it added. The proposed guidelines
come as more financial institutions rely on quantitative models, including those using
artificial intelligence (AI) and machine learning, to inform credit decisions, risk
management, pricing, and even regulatory compliance.
While these tools can offer improved insights and efficiency, the BSP warned that
flawed models or misuse of outputs may lead to “financial losses, poor
strategies/decisions and reputational damage to the BSFI.”
The BSP is mandating all BSFIs to adopt an MRM framework with key
components such as model governance, development, validation, implementation and
performance monitoring. The framework should enable institutions to “identify, measure,
mitigate, monitor as well as report model risks” at both entity and group levels.
IV. References
Amojelar, D. G. (2024, November 6). BSP issues new rules to boost banks’ resilience.
Manila Standard. Retrieved from https://manilastandard.net/business/314520122/bsp-
issues- new-rules-to-boost- banks-resilience.html
Rangachary Ravikumar and Paul Williams (2023,May 12). Philippines: Developing a
Regulatory and Supervisory Framework for Operational Resilience.Retrieved
from.https://www.elibrary.imf.org/view/journals/029/2023/004/article-A001-
en.xml
Banko Sentral ng Pilippinas (Office of the Governor) Circular Number 1203 series of
2024.Retrieved from. https://www.bsp.gov.ph/Regulations/Issuances/2024/1203.pdf
Keisha Ta-Asan - The Philippine Star (June 29, 2025). BSP to set rules on managing risks.
Retrieved from. https://www.philstar.com/business/2025/06/29/2454034/bsp-set-
rules-managing-risks
