“The Philippine central bank is considering adjustments to its so-called special deposit accounts, signaling it may limit access to the facility to cut costs and enhance its scope to cool currency gains.
“We would like to consider ways to make the SDA function more as a monetary instrument rather than an investment vehicle,” Governor Amando Tetangco said on April 27 in an e- mail response to questions. “The exact form of these refinements will be made known in time, but as in our practice, any adjustments we will make will be gradual and phased in.”
The possible change in the SDA, which hold about $46 billion, comes after Bangko Sentral ng Pilipinas on April 25 cut the rate it pays on the deposit facility for a third time this year. The monetary authority has lowered borrowing costs, banned foreign funds from the special accounts and revised rules to spur outflows, joining South Korea and Thailand in stepping up efforts to temper currency appreciation.
“The central bank is trying to manage its costs so it will have greater flexibility to intervene in the currency market,” said Ricky Cebrero, executive vice president and head of treasury at Manila-based Philippine National Bank. (PNB) “If the BSP limits SDA access through trust accounts in the near future, some funds may shift to bank deposits subject to an 18 percent reserve requirement. That will further reduce BSP’s costs.”…”
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