BSP trims term deposit offer

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) slashed anew the volume of the term deposit auction facility (TDF) to P130 billion starting Nov. 2 from the current level of P140 billion amid the shrinking excess liquidity in the financial system.

This is the third time the volume has been reduced since October. The size of the facility was reduced to P150 billion from P180 billion in September then to P140 billion in October and now to P130 billion.

The size of the seven-day term deposits was retained at P40 billion while the volume of the 28-day term deposits was reduced three times to P110 billion from P140 billion then to P100 billion, and then to P90 billion.

BSP Governor Nestor Espenilla Jr. said in an interview on the sidelines of a luncheon meeting organized by the European Chamber of Commerce of the Philippines (ECCP) that the adjustment in the TDF volume was part of the fine-tuning of the interest rate corridor (IRC) framework launched in June last year.

He said authorities continue to evaluate the level of liquidity in the financial system amid the growing requirement of an expanding economy.

Espenilla said the TDF aims to bring market rates closer to policy rates which serves as a tool to mop up excess liquidity in the financial system.

“The TDF is a venue for placing excess liquidity with the BSP. So if the excess liquidity is going down, then banks are not placing anymore with the BSP as much as they used to. But we need to do a deeper analysis,” he said.

BSP Deputy Governor Diwa Guinigundo said the 28-day term deposits have been undersubscribed for the last two weeks and the market continued to be biased in favor of the shorter-dated term deposits.

 “We continue to see the impact of excess, but smaller, liquidity in the market on both subscription and interest rates pertaining to seven and 28 days. Banks have sustained their lending to their clients, purchasing dollars to service imports and debt servicing requirements and investing in various financial instruments including government securities,” he said.