Special deposits surged 48% to P2.946B in 1st 9 mos.

Special deposit accounts (SDA) placed by banks with the Bangko Sentral ng Pilipinas (BSP) surged by 47.7 percent in the first nine months of the year as investors continued to search for risk-free, high yielding debt instruments. Data released by the BSP Tuesday showed that the SDA placements amounted to P911.4 billion in the January-September period, up P294.6 billion from P616.8 billion a year earlier. The facility consisted of fixed-term deposits by banks and by trust entities of banks and non-bank financial institutions with the BSP. It was introduced in November 1998 to enable the BSP to expand its toolkit in managing liquidity, or money circulating in the country, as a means of controlling inflation. The BSP in April 2007 expanded access to SDAs by allowing trust entities to place money in the facility as higher amounts of foreign exchange were flowing into the country. Investors continued to shift to high-yielding SDAs resulting in a shift of funds from reverse repurchase agreements (RRPs) — another tool monetary authorities use to sop up liquidity from the financial system. A reverse repurchase transaction involves the purchase of fixed-term, fixed-yield securities from the central bank. The central bank said the total volume of banks' placements with the BSP under the RRP window went up by 13.6 percent to P245.1 billion in the first nine months of the year from P215.8 billion in the same period last year. The BSP has withdrawn several liquidity enhancing measures introduced in November 2008 against the impact of the global financial crisis on the Philippine economy. Crisis-related measures the central bank tweaked included the increase in short-term lending rate to 4 percent from 3.5 percent on Jan. 28, 2010 and reducing the peso rediscounting budget to P40 billion and further to the pre-crisis level of P20 billion from P60 billion. Monetary authorities also restored the loan value of all eligible rediscounting papers to 80 percent from 90 percent of the borrowing bank’s credit instrument, and the non-performing loan ratio requirement of 2 percentage points from 10 percentage points. — VS, GMANews.TV