BSP vows to be ‘more active’ on capital flows

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) has vowed to remain “more active” in dealing with capital flows by using macro-prudential measures ahead of its policy meeting on Thursday.

 â€œWe will be even more active in deploying macro-prudential tools,” said BSP Deputy Governor Nestor Espenilla Jr., who will preside over the Monetary Board meeting on April 25 as officer-in-charge.

BSP Assistant Governor Ma. Cyd Tuaño-Amador, in a separate interview, said there are still “many speed limits” that may be put in place, should it be necessary, to preserve financial stability.

Over the past year, the central bank has unveiled numerous measures targeted at ensuring capital inflows go in and out of the economy smoothly and avoid excessive volatility to the peso movements.

In July last year, it prohibited foreign funds from parking on special deposit accounts (SDA), which are fixed-term deposits of banks and trust departments with the BSP. It was followed, a month later, by a more comprehensive coverage of real estate exposure.

Concerns on asset bubbles however remain, Espenilla said, adding that monetary officials have been watchful of the banking industry’s “significant exposure” to the real estate market.

“We want to avoid, for example, asset bubbles from forming. We are always mindful of the possible instability that may be caused,” he explained. Property exposure data for last year will be out next week.

The BSP announced on end-2012 that it would start putting a cap on banks’ non-deliverable forwards this year. The two-month adjustment period was extended until May.

The result of all these measures was reflected on the “tolerable movement” of the exchange rate, Amador said.

The peso’s volatility, she said, has been contained despite the currency’s strength as a result of large inflows.

The peso, which closed at 41.075 to a dollar last Friday, has appreciated by 0.6 percent versus the greenback as of March, BSP data showed. Last Thursday, foreign exchange rules were liberalized for the sixth time since 2007 to tame the unit’s rise.

Among others, residents were allowed to purchase more foreign currencies for travel and other expenses, while foreigners may now exchange more remaining pesos for other currencies. More investment products, including real estate, were also opened for Filipinos.