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BSP signals no change in special deposit accounts

abs-cbnNEWS.com | 11/21/2008 9:33 PM

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The Bangko Sentral ng Pilipinas (BSP) said Friday it has no plans of scrapping or changing the terms of its special deposit accounts (SDA) at the moment.

BSP governor Amando Tetangco Jr. said the central bank already reviewed the SDA facility and decided it was still effective.

Last year, the BSP opened its SDA facility to trust entities but later closed three of its six SDA windows as liquidity growth slowed down.

The BSP made more moves to boost liquidity in the system, like the recent two percentage point reduction in banks' reserve requirement, to encourage more lending activity amid the global financial crisis.

But banks argued that the funds released by the reduction in the reserve requirement would only go back into the SDA facility. Thus, they urged the BSP to close its remaining SDA windows.

According to BSP deputy governor Diwa Guinigundo, however, the central bank has not actually detected funds being shifted back to the SDA facility.

"We don’t see it coming back to the BSP yet, but then it is very difficult to track down," noted Guinigundo.

The central bank said it intends to keep the SDA in its "monetary policy tool kit."

On Thursday, the BSP kept its benchmark interest rates unchanged, indicating that rising core inflation could rule out any rate cut for the remainder of the year.

"The Monetary Board noted that, while price pressures are retreating and inflation expectations are moderating, the rising readings on core inflation suggest that there are still price pressures in the pipeline," said Tetangco.

"Furthermore, sources of upside inflation risks remain, including the volatility in the foreign exchange market," he added.

The BSP’s rates were steady at 6 percent for overnight borrowing and 8 percent for overnight lending.

as of 11/21/2008 9:33 PM