When The Asset suggested that he was part of the nucleus of Asia’s Next-Gen central bank governors, Nestor Espenilla Jr, laughed off the idea. “I’m already on the last leg of my central bank career and I am just doing as much as I can with the opportunity given me.”
His response was quintessential especially to those who knew him well. Self-effacing, the governor of the Bangko Sentral ng Pilipinas (BSP), who passed away on February 23 after a year of battling cancer, remained grounded despite having risen to the pinnacle of his career. Indeed, he surprised many in the Philippine banking and finance industry. In less than two years, he initiated a series of reforms in the capital markets, launched the digitization of the payment system, further liberalized the foreign exchange market and amended the New Central Bank Act of 1993.
As a magna cum laude graduate from the School of Economics, University of the Philippines, Espenilla could take his pick of whatever job he wanted. But he did not even bother to apply in the private sector. Central banking was his first and only job.
“Choosing where I would go after university, I have always wanted to work in government,” he shared with The Asset during a series of in-depth conversations in 2017 and 2018. “I felt [it is in government] where I will be able to give back, to have an impact and do things that matter.”
Espenilla said he applied at agencies which he felt offered a combination of challenge, professionalism and upside growth. “At the time, I was looking at NEDA (National Economic and Development Authority), NDC (National Development Co), PNB (Philippine National Bank, which was then government owned) and BSP. In the end, I got a positive hit from the BSP.”
Starting his career as a debt analyst in 1981, he was with what was then the management of external debt and investment department (Mediad). “I started at the entry point,” he pointed out. “There were no shortcuts for me to the top.” Indeed, Espenilla also knew little at the time that the country was heading into a full-blown debt crisis eventually declaring a 90-day debt moratorium in October 1983. It was to be a baptism of fire putting to the test his mettle as a banker for the first time.
In the second year of his career, he started to work with governor Amando “Say” Tetangco, Jr, his predecessor, who was in economic research. “He was a rising star and throughout those years we have worked closely together.”
He continued: “You learn a lot along the way. I was the main technical assistant of governor Gabby Singson and also with governor Joey Cuisia, Jr and governor Jose Fernandez. My biggest career breaks came from governor Paeng Buenaventura who promoted me thrice in my career. Paeng was the architect of succession in the BSP.”
Benefitting from what he described as “a long line of illustrious governors” before him certainly helped instill in him a calm demeanor especially during the middle of 2018 when the sell-off in the emerging markets engulfed the Philippines and was looking like the 1990s Asian financial crisis.
When The Asset questioned him in August 2018 about a potential crisis in the offing, Espenilla replied calmly. “The outcome for economies generally depends two-thirds on what they do internally and a third is from external [factors]. This is where contagion comes in. A large part of our policy response is in a way to crisis-proof the economy. Much of that is basic homework: paying attention to economic fundamentals and to keep the economy in a way that is seen as to be run properly.
“You also need to constantly hone skills to move quickly with the changing scenario. You need to have dynamism in your responses. That includes constant surveillance, good judgement to decide when to move and when not to. There is that wild card out there. Therefore, part of the task is constant buffering and to build sources of strength so that you can take care of contingencies. That is the constant battle.”
However, Espenilla was also quick to point out that it was important that financial sector reform continued. “For a small, open emerging market economy such as the Philippines that is aspiring to attain a certain high level of development, you can’t get bogged down by the short-term. You also need to overlay what you are doing to keep everything stable with ambitious policy reform. You have to manage longer-term investments. Some of these important reforms that are very good for the medium to long-term sometimes can seem to conflict with short-term concerns.”
He was therefore a firm advocate of a more open and transparent central bank. “The challenge of communication cannot be underestimated. We need to engage the full constituency from the political establishment, business, ordinary citizens to help them see through the fog of all these swirling events and have a sense of hope that the economy is not crumbling despite all the periodic negative news. There is a lot of positive stories underneath. Part of the communication challenge is to put all of these together into a coherent narrative of progress. This is not to deny that the challenges are real and they come in unexpected salvos.”
An early riser who would get up by 5.15am on weekdays, Espenilla shared his little diversion. “I love animals especially dogs. I have five dogs and I would walk them around every chance I could in the early morning. It clarifies my mind; it is uncomplicated and gives me fresh perspectives. Sometimes I think about monetary and banking policy,” he said with a laugh.
Did he ever imagined that he would one day become the governor of the BSP, The Asset asked him. “Not on day one!” he laughed again. “Actually, I have a higher aspiration than that!”
The Asset asked him given what he knew then what he would have done differently. Espenilla paused in what seemed like an eternity, and then he sighed and said:
“In all honesty, I came in with a game plan, the Continuity Plus-Plus game plan. I have been active from day one and I am still active at this point of time. I don’t think I have swerved from that agenda. Sometimes, my approach is non-linear so I push across the possibilities. If I encounter resistance here, I push on another front until I have a better timing for the other ones.”
“To me, what’s more important is the strategy that I embraced from the beginning to achieve certain goals given the modest time and opportunity that has been afforded me. I’d like to think that I have maximized the opportunity given the shifting environment and the resistance you have to work with.”
“I want to see the banking system transformed because of these major reforms – an inclusive, progressive and efficient financial system that supports a high growth economy. I want to do my bit in preparing that kind of society by having improvements in the way the BSP does things.”
Espenilla said one cannot be driven by fear of potential crises to do the job well.
“You cannot be defined by your own fears of what’s lurking out there because that would just put you in a static corner and not get anywhere, which is the greatest risk: to be immobilized and unable to move forward because you are afraid of the next big crisis.”
“The only thing to be done is to have a clear strategic objective, do the homework, make the necessary preparations and have the courage to move forward. Don’t be complacent; always have constant surveillance and constant buffers. It is a very taxing activity but to my mind that is the only way to get things done. At the same time be ready for what comes around to you.”
“One of the things that has been a challenge for me is my health. Sometimes I ask myself is there something I could have done to be in better health. But maybe it was going to be that way anyway. I could not have been too afraid.”