Philippines Further Limits Access to Special Deposit Accounts

The Philippine central bank will further limit access to special deposit accounts, stepping up efforts to curb inflows and reduce costs of managing liquidity.

Starting 2014, Bangko Sentral ng Pilipinas will ban so-called investment management activities, a type of account in banks’ trust departments, from SDAs, according to a memorandum posted on its website today. The central bank will begin to gradually phase out these funds this year, according to the memo.

The Philippines, which won its first investment-grade ranking from Fitch Ratings and Standard & Poor’s this year, is seeking to slow surging capital inflows that boosted the peso and sent stocks to a record-high this month. Bangko Sentral cut the rate on SDAs three times this year to 2 percent, after banning foreign funds from the facility in 2012.

“BSP continues to fine-tune the SDA to try and limit the possibility of offshore money finding its way into the facility,” said Prakriti Sofat, a Singapore-based regional economist for Barclays Plc. “They also want to reduce the overall amount of SDA deposits given that it continues to pressure the central bank’s balance sheet. I won’t be surprised if the central bank announces more measures.”

Bonds due December 2035 fell, with the yield rising 2.5 basis points to 4 percent, according to Tradition Financial Services. The peso was little changed at 41.182 per dollar as of 3:35 p.m. in Manila. It is the third-best performer in Asia in the past 12 months, data compiled by Bloomberg show.

The central bank had a 95.4 billion-peso ($2.3 billion) loss in 2012 from 33.7 billion pesos a year earlier, according to data on its website. Almost half those losses were due to exchange-rate fluctuations, the BSP has said.

Greater Flexibility

The monetary authority expanded access to the SDA in May 2007 after money-supply growth climbed to 28 percent the previous month. Monetary growth accelerated to 11.41 percent in March this year, a three-year high.

The review of SDAs is part of “continuing efforts to fine-tune monetary policy instruments and thereby gain greater flexibility in conducting monetary operations, and also to ensure adequate liquidity,” the BSP said in its memo today.

The SDAs held 1.93 trillion pesos as of April 26. Portfolio inflows climbed to $3.51 billion in April, about 137 percent higher than a year earlier, according to central bank data.

The central bank said April 18 it had broadened the range of approved outward investments to spur capital outflows and slow the peso’s gains. It held the rate it pays lenders for overnight deposits at a record low at its review April 25.

“We’re concerned about the impact of inflows, that’s why we have to undertake certain measures to minimize potential negative threats,” Governor Amando Tetangco said in an interview on May 17. He didn’t respond to questions seeking comments on the memo today.

To contact the reporter on this story: Karl Lester M. Yap in Manila at

To contact the editor responsible for this story: Stephanie Phang at

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