Before the sub-prime crisis in the US, most low-income borrowers were too optimistic about their income and applied for loans that they couldn’t afford to repay. But the market is volatile; the running of the economic cycle is not at the control of borrowers. When income shrinks or interest rate resets, borrowers will have to pay more, and potential risks translate into actual crisis.
In the BSP, we engage in nation building through the formulation of monetary policy, banking supervision and the functioning of an efficient and reliable payments settlements system.