Bangko Sentral to bar trusts from investing in its liquidity facilities
Reuters
Posted at Nov 24 2016 02:36 PM
http://news.abs-cbn.com/business/11/24/16/bangko-sentral-to-bar-trusts-from-investing-in-its-liquidity-facilities
MANILA – The Philippine central bank said on Thursday that trust entities will no longer be allowed to invest in its two deposit facilities beginning from July 1 next year to encourage them to park their funds elsewhere.
The move is part of the central bank’s efforts to “rationalize” the use of both its Overnight Deposit Facility (ODF) and Term Deposit Facility (TDF) as liquidity management tools, it said in a statement.
Bangko Sentral ng Pilipinas Governor Amando Tetangco said the change should be good for the trust industry as “it will encourage trust entities to grow by developing the expertise in fund management, instead of simply being passive and placing funds with the BSP to earn a decent return.”
The move should also help deepen the domestic capital market, he added.
The central bank has approved a phased implementation of the policy. All ODF and TDF placements of trust entities as of Sept. 30 shall be reduced to 50 percent by Dec. 31 and to 30 percent by March 31, it said.
All remaining ODF and TDF placements of trust entities shall be terminated by June 30, it said.
The ODF and TDF have served as monetary policy instruments for managing domestic liquidity since June this year when the central bank introduced the interest rate corridor (IRC) system.
The IRC system is intended to help ensure that money market interest rates move within a reasonably close range around the central bank’s key interest rate.
