These intensified efforts to deepen and accelerate the evaluation, measurement, and disclosure of risks under Basel II are expected to strengthen the financial system. In this regard, risk management is consistent with the greater transparency and forward-looking nature of Inflation Targeting (IT), which is the monetary policy framework that the BSP has been using since 2002.
As in the IT approach, a wider set of information and disclosure requirements are used to enhance risk management. There is also more emphasis on anticipation of risks over a longer horizon and on greater sensitivity to market views. As a major channel for monetary policy, a stable financial system is a necessary condition for inflation targeting to work well in this country.