The Bangko Sentral ng Pilipinas will take the pulse of the market on its planned debt paper after President Rodrigo Duterte signed the BSP Charter amendments into law.
“We are going to conduct market-sounding exercises... Once we got the details, we will give it to the Monetary Board,” said Deputy Governor Diwa Guinigundo Friday.
He said the Bangko Sentral was likely to get the approval of the board before proceeding with the planned debt paper issue.
The new BSP Charter embodies a package of reforms that will further align its operations with global best practices, improve the central bank’s corporate viability, and enhance its capacity for crafting proactive policies amid rising interlinkages in the financial markets and the broader economy.
In line with current international trends, the law removes money supply and credit levels as basis for determining the monetary policy. The focus on these indicators has declined among central banks over the years, as fostering price stability now considers a broader set of indicators.
The revised charter also restores the central bank’s authority to issue debt papers as part of its regular operation. This gives the BSP greater flexibility in determining the timing and size of monetary operations.
Deputy Governor Maria Almasara Cyd Tuano Amador said in a previous briefing the Bangko Sentral would avoid competing with the national government in the issuance of debt papers.
“We’ll deliberately work on the operational details so that there will be no competition between the national government and the BSP,” she said.
Amador said the BSP wanted to have an expanded toolkit, an arsenal of policy instrument that could be used to fine-tune monetary aggregates in the economy.
“We have the current instruments and you very know about that already. But this one, particularly, the restoration of the authority to issue central bank debt papers... it’s a structural surplus liquidity absorption tool. So as to when it will be used it will be dictated by the times,” Amador said.
The amended charter also widened the coverage of institutions under BSP supervision to include money service businesses, credit granting businesses and payment system operators. This puts the BSP in a strategic position to address potential risks arising from the linkages of banks and these financial entities.
Moreover, the law authorizes the increase in BSP’s capitalization from P50 billion to P200 billion, which will be secured from dividends declared by the BSP in favor of the national government. Under the new BSP Charter, the central bank is also exempt from taxes on income derived from its governmental functions.