BSP: SDAs up 66.4% in first half of 2011

Funds parked in the vault of the Bangko Sentral ng Pilipinas (BSP) in the form of special deposit accounts (SDAs) grew by 66.4 percent in the first half of the year, according to latest data released by the BSP in its 2nd Quarter 2011 Inflation Report. The data showed that placements in the SDA facility of the central bank had reached P1.388 trillion as of end-June, or P554 billion more than the P834.4 billion placed in the same period last year. The SDA facility, introduced in November 1998 to enable the BSP to expand its toolkit in liquidity management, consists of fixed-term deposits by banks and by trust entities of banks and non-bank financial institutions. SDAs increased in the first half of 2011 as investors kept searching for high yielding investment instruments due to the lack of major infrastructure and development projects in the country. In April 2007, the BSP had expanded access to the SDA facility by allowing trust entities to deposit in the SDA facility, in order to better manage liquidity in the face of strong foreign exchange inflows. RRPs also up The BSP also reported that bank placements under its reverse repurchase agreements (RRPs) went up by 42.7 percent to P295.4 billion as of end-June from P88.4 billion in the same period last year. RRPs are also used to siphon off liquidity from the financial system. The central bank said RRP, which refers to the purchase of securities from the BSP with an agreement to sell them back at a fixed date, has increased by P207 billion. Last year, the BSP withdrew almost all the several liquidity enhancing measures that had been introduced in November of 2008 to cushion the impact of the global financial crisis on the domestic economy. Crisis-related measures that were tweaked include the increase in the rate on the short-term lending facility to four percent from 3.5 percent; the reduction of the peso rediscounting budget from P60 billion to P40 billion and then further down to pre-crisis level of P20 billion; the restoration of the loan value of all eligible rediscounting papers to 80 percent from 90 percent of the borrowing bank’s credit instrument; and the restoration the non-performing loan (NPL) ratio requirement of two percentage points from 10 percentage points. — KBK, MRT, GMA News