Independence for the SC and BSP

Last July 3, I had the distinct honor of being invited by the brilliant economists and seasoned bankers of the Bangko Sentral ng Pilipinas to celebrate the BSP’s 33rd anniversary with the launch of the book, “Risk and Resilience in the Philippine Financial System: How Much Has Changed?” Against the backdrop of the crashing waves on the book’s cover, BSP Governor Eli M. Remolona Jr. stressed that “[b]uffers must be built before a crisis…” This kept me wondering: What has been our nation’s, and for that matter, the world’s most reliable defensive “buffer” against decades of relentless waves of financial crises?

HISTORY’S ANSWER, I BELIEVE, points to the institutional independence of central banks. For instance, the United States Federal Reserve (Fed) has been shaped by a “long tradition of independent central banking.”

The Fed emerged from the realization that “calamities could arise from even the suspicion of political manipulation of monetary policy.” Thus, it was deliberately insulated from political control so that monetary policy would be guided by economic realities rather than by partisan expediencies.

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Very recently, this independence was put to the acid test when mercurial US President Donald Trump tried to remove Fed Governor Lisa Cook from her office in 2025. The Supreme Court of the US, in Trump v. Cook (June 29, 2026)—speaking through Chief Justice John Roberts, Jr.—ruled by a narrow 5-4 vote that members of the Fed’s Board of Governors may be removed only “for cause,” and after notice and an opportunity to contest the removal, as opposed to “at will” by the president. The landmark decision explained that even the nation’s highest political office has constitutional limits when dealing with independent institutions.

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AT THIS POINT, let me explain what this ruling entails for our country, and specifically for the BSP.

First, the Fed and the BSP share a remarkably similar evolution. Just as repeated financial crises prompted reforms that led to the creation of the Federal Reserve System in 1913, the joint Philippine-American Finance Commission recommended the establishment of the Central Bank of the Philippines (CBP) in 1948. Since then, both institutions have undergone legislative reforms to adapt to changing economic realities while preserving their institutional independence.

Our 1987 Constitution mandates “Congress [to] establish an independent central monetary authority…” (Article XII, Sec. 20). Unlike our Supreme Court, which sourced its independence directly from the Constitution as a coequal branch of government, the BSP’s independence is derived from, and its powers defined, by statutes.

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Accordingly, Republic Act No. 7653 (the New Central Bank Act) implements the constitutional mandate by providing that “[t]he State shall maintain a central monetary authority that shall function and operate as an independent and accountable body corporate…” This law led to the abolition of the CBP and the creation of the BSP in 1993, which, as its newly launched book aptly notes, was “armed with operational independence” capable of steadying the severe volatility of the 1997 world financial crisis.

Second, if the independence of the Fed can be tested by political pressures, so too can the independence of the BSP. What would happen if the BSP were stripped of its independence and bowed to partisan interference? In my humble opinion, our country would return to the structural weaknesses that once made it vulnerable to recurring crises. Such unwanted vulnerability could gradually erode monetary policy, encourage heavy short-term borrowing, diminish our macroeconomic buffers, and ultimately destabilize the economy.

VERILY, WITHOUT AN INDEPENDENT MONETARY AUTHORITY, our long-term economic stability would inevitably yield to short-term political convenience. The nation’s financial “buffer” would become increasingly fragile against the crashing waves of future crises.

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Remolona made a relevant observation during the Supreme Court’s 125th anniversary celebration (quoted in my June 22, 2026 column), “The [SC’s] independence is a condition sine qua non to the independence of all other institutions.” As he succinctly put it, “The BSP pursues the same stability … when we remain independent.”

As a once-upon-a-time chief justice, I humbly say that institutional independence is never permanently secured. It must continually be earned, protected, and reaffirmed. Were I in the position of our central bankers, I would defend the BSP’s independence in the same pugnacious way in which the Supreme Court safeguards its judicial independence—through unwavering fidelity to the rule of law, steadfast institutional integrity, and the courage to resist partisan pressures.

To close, independent institutions remain the bedrock of our democracy. Whether it is the Supreme Court protecting our liberty or the BSP safeguarding our economic prosperity, both serve as anchors that enable the nation to conquer the tempests of the present and the future.

Ultimately, nations are fortified by the buffers of independent institutions, while the rule of law charts their enduring aspirations of liberty and prosperity.

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