The Bangko Sentral ng Pilipinas (BSP) said that it has enough measures to buffer the negative effects of global financial challenges on the country’s money supply.
“We have a package of measures that we could consider deploying should there be significant liquidity strains stemming from the challenges that could affect global financial markets, and more broadly the global economy,” BSP Governor Amando Tetangco Jr. said in an email to reporters.
He noted that one of the measures that the BSP is looking into is to adjust the terms of access to the central bank’s rediscounting facilities.
The BSP’s rediscounting facility has been restructured recently to align it further with the central bank’s market-based monetary operations framework, and with the international central banking practice of scaling down directed credit operations
With the rationalization of the facility, Tetangco said that the BSP’s peso rediscounting window will turn into an open-volume facility effective November 15 this year.
“Meaning that requests of banks to the facility will be granted regardless of amount subject to compliance with predetermined eligibility requirements,” he added.
Meanwhile, Tetangco mentioned that based on BSP forecast, the country’s money supply or domestic liquidity (M3) growth could continue to remain solid over the near term.
He attributed the growth in money supply to the operational adjustments special on the deposit accounts (SDA), which prohibits banks from putting funds owned by their foreign clients in the facility.
SDA is a monetary facility instrument made available to banks for managing excess domestic liquidity in the financial system. Banks placing funds in the facility is required to submit a notarized certification saying that the money only came from investors residing in the country.
Latest BSP data showed that adjustments in the SDA facility continue to be the growth driver of the country’s money supply, which increased by 30.9 percent year-on-year at end-August 2013 to reach P6 trillion.
Tetangco noted that SDA adjustments spur lending to the productive sectors of the economy and this should expand the economy’s productive capacity, and dampen inflationary pressures.
However, he said that the forecast also indicated that M3 growth would moderate after some time, and thus not pose a threat to the price stability objective.
“It bears pointing out that this [period of temporary strong M3 growth]is something that we have anticipated earlier on when we were vetting the potential impact of our policy actions,” he added.