Interest rates on peso, FCDU accounts lowered

MANILA, Philippines — Philippine banks have started reducing the interest on peso and foreign currency deposit accounts as the Bangko Sentral ng Pilipinas (BSP) has slashed interest rates by 175 basis points so far this year to soften the blow of the coronavirus disease 2019 or COVID-19 pandemic.

Ayala-led Bank of the Philippine Islands (BPI) slashed the interest on peso savings accounts, including express teller savings, passbook savings and jumpstart savings, among others, to 0.125 percent at the start of September from the previous 0.25 percent.

The interest on peso checking accounts, including maxi-one for both individuals and corporates, were also lowered to 0.125 percent from 0.25 percent.

The country’s third largest lender also lowered the interest rates on third currency savings accounts, including the Australian dollar passbook savings to 0.125 percent from 1.25 percent, the Canadian dollar passbook savings to 0.125 percent from 0.25 percent, and Chinese yuan passbook savings to 0.05 percent from 0.1 percent effective last Aug. 1.

As early as April 1, BPI lowered the interest on express dollar savings and dollar savings with passbook to .05 percent from 0.25 percent.

Dino Gasmen, treasurer at BPI, said the lower interest on peso and foreign currency deposit accounts could be attributed to the decision of the BSP as well as the US Federal Reserve, to cut policy rates that are used as industry benchmark rates.

“The rate adjustment was implemented to align with the decline in the BSP policy rate and the ample liquidity in the banking system. Lower US dollar savings rates were likewise a result of a reduction in the US Fed funds rate during the first half of the year,” Gasmen said.

As part of COVID-19 measures that unleashed P1.3 trillion into the financial system, the BSP’s Monetary Board slashed interest rates by a cumulative 175 basis points so far this year and brought the overnight reverse repurchase rate to an all-time low of 2.25 percent.

However, the central bank took a prudent pause last Aug. 20 and kept interest rates steady to allow previous aggressive monetary easing, including the lowering of the reserve requirement ratio, to work its way through the economy that stalled due to the COVID-19 pandemic.

Despite the lower market-driven rates, Gasmen said BPI’s deposit products continue to provide the banking public with good value beyond interest earnings.

Starting Sept. 15, BDO Unibank Inc. is also slashing interest on peso savings to 0.125 percent from 0.25 percent, while the interest on US dollar savings account was reduced to 0.05 percent last Aug. 15.

BDO owned by the family of the late retail and banking magnate Henry Sy is the country’s largest lender in terms of assets, capital, deposits, and loans.

Likewise, Ty-led Metropolitan Bank & Trust Co. (Metrobank) also lowered the interest on personal deposit accounts, including passbook savings, debit/ATM card savings and checking accounts to 0.125 percent from 0.25 percent last Aug. 7.

The country’s second largest bank in terms of assets also reduced its MetroDollar Savings to zero last Aug.7.

Earnings of banks operating in the Philippines slumped by 29 percent to P86.05 billion in the first half of the year from P111 billion in the same period last year as the industry’s provision for soured loans breached P100 billion due to the impact of the global coronavirus debacle.

Preliminary data from the BSP showed provisioning made by banks for credit losses on loans and other financial assets amounted to P103.77 billion from January to June or more than five times the P19.75 billion it allocated in the same period last year.