When Jose B. Fernandez, Jr. assumed office as the sixth Central Bank Governor on January 19, 1984, the country under political and economic upheavals brought about by the unsettling political and social events of the second half of 1983

The situation required painful and unpopular measures which were, however, vital to economic survival and recovery. The Central Bank prescribed a “bitter pill” - monetary stringency to contain inflation and help restore balance in the country’s external payments position. Its main ingredients were the greater flexibility of the exchange rate, credit restraint, issuance of high-yielding CB bills and closure of problematic banks. The medication demanded a lot of sacrifices from all sectors. While it was arresting the bleeding of the economy, it was also holding down growth.

The Central Bank continued to implement emergency measures - requiring banks to sell all foreign exchange for specified purposes, and opening up of other modes of importation – adopted in November 1983. Moreover, the substantial depreciation of the peso since June 1983 was allowed to continue until June 1984. Additional monetary instruments, such as the blocking of peso differentials and deposits in connection with swap arrangements with banks, were employed to help reduce inflation. In October 1984, all emergency exchange controls were lifted and the exchange rate was allowed to be determined fully by market forces. This resulted in a sharp depreciation of the peso. The peso recovered in late October 1984 and continued to get stronger as the demand for dollars slackened due to tight monetary policy. As the country began to get back on its feet, the Central Bank's flexible exchange rate policy served as one of the major anchors of its economic recovery program.

To maintain the stability of and balance among interest rates, exchange rates and domestic prices, open market operations were increasingly used. New instruments were developed and traditional ones were improved. New short-term instruments at market rates were issued to complement the sale of CBCIs and Treasury bills. The Bank introduced the CB bills, which later became better known as “Jobo bills,” to help mop up excess money. The introduction of these CB bills at high yields forced the banks to increase their deposit rates to attract more depositors and also foreign funds.

All the sacrifices did not go to naught. Towards the end of 1985, external payments were made, the exchange rate of the peso had stabilized, the balance of payments and international reserves positions had improved, and the inflation rate had gone down to 23 per cent from an average of 50 per cent in 1984.

The Central Bank needed to adjust its structure and redefine its character to keep pace with rapid changes due to liberalization, deregulation, and increasing globalization. This was what Governor Fernandez exactly had in mind when he pursued major changes within the Bank.

One of these changes involved the Central Bank’s disengagement from development banking. Special funds that were directly handled by the Bank under different fiscal allocations were consolidated into a fund and transferred to the Department of Agriculture, which it administered then through the Land Bank of the Philippines or Philippine National Bank. Later, the World Bank-funded Agricultural Loan Fund was transferred to the LBP, while the Apex Fund for industrial development and the Industrial Guarantee Loan Fund were transferred to the Development Bank of the Philippines.

The shift to market forces led to a complete change in the work program of the CB departments involved in import and foreign exchange controls. Central Bank dispensed with prior approval of most import items. These were post-audited instead. The Bank also relinquished all forms on no-dollar import licensing.

When the Central Bank undertook all these reforms, the need to mount an information system became imperative. This entailed changing the data processing system and training of the staff in on-line processing. Governor Fernandez supported efforts to advance information technology which were pursued even after his term.