The Philippines plans to close a loophole in regulation of trust funds, by restricting those overseen by banks from parking short-term cash at the central bank.
Bangko Sentral ng Pilipinas is considering limiting lenders’ trust units from placing funds in its short-term deposit facility, monetary board member Felipe Medalla said Tuesday.
Policy makers are reviewing access to its liquidity-mopping tools “under the overall framework” of its interest-rate corridor, Governor Amando Tetangco also said Wednesday.
Banks’ trust units have undue advantage over non-bank trust groups that aren’t allowed to put money in the central bank’s special deposit account or SDA facility, and also over lenders themselves that must comply with the reserve requirement, Medalla said in an interview.
Placements in the so-called SDA facility, which the central bank uses to control liquidity, totaled about $16.8 billion as of Dec. 29. The central bank is preparing to shift to an interest-rate corridor by the second quarter, a move intended to strengthen its policy tools.
At present, the central bank pays 2.5 percent for funds placed at SDAs, compared with its benchmark rate of 4 percent. The 91-day Treasury bill fetched 1.684 percent at the most recent auction.
Meanwhile, Tetangco said the Philippines banking system would continue to be a pillar of growth for the domestic economy this year. “While 2016 will test the resilience of our banking system, we can rely on the quality of our preparations to manage evolving risks from volatility as market tide shifts,” Tetangco said in his speech during the annual bankers’ night held at Fort Abad, Bangko Sentral complex.
“This is also evident even to external analysts. Fitch Ratings has given the Philippine banking system a positive rating outlook for 2016, the only one for Asia-Pacific. Among others, Fitch noted the ‘generally healthy profile of local lenders, sound operating environment and the Philippines’s strong economic fundamentals,” Tetangco said.
Deputy Governor Nestor Espenilla Jr. said more foreign banks were also expected to enter the liberalized domestic banking industry to seize the opportunities in the growing Philippine market.
Espenilla said bigger foreign banks would wisely choose to locate in potential markets like the Philippines rather than stay in their own stagnant markets.
“I would not be surprised if more will come and do similar transactions because it makes sense,” Espenilla said, referring to the recently-sealed acquisition by Bank of Tokyo Mitsubishi UFJ of a 20-percent stake in Security Bank Corp.
Bloomberg with Julito G. Rada
“There are many growth areas in Southeast Asia, for example, so it is quite logical that banks are looking at the Philippines because their home markets are stagnant. So if they are looking for growth,
Philippines is one place to go,” Espenilla said. With Julito G. Rada
