RCBC launches long-term dollar deposit

MANILA, Philippines -  Rizal Commercial Banking Corp. (RCBC) is targeting a $650-million time deposit (TD) portfolio by the end of 2014.

Of the total amount, the bank hopes to generate roughly $50 million from long-tenure TDs recently introduce although the majority of the TDs would still be the standard short tenure deposits.

RCBC vice president and head for deposits, investments and cross-selling Roel Lustado said they introduced the longer-tenure TDs to complement its foreign currency deposit unit (FCDU) portfolio. “It is cheaper for the bank to raise dollars on these manner, rather than have to tap the capital markets for its US-dollar needs.”

The demand for US dollars, and foreign currency in general, has been increasing as business sentiment improves and more foreign direct investors (FDIs) have found their way to free trade or export processing zones in the Philippines.

Lustado said that there was demand on the corporate and individual levels for foreign currency, which local banks must have access to.

“Expatriates working in the Philippines, for example, want to send money back to their country of origin. And overseas transactions are settled through US dollars,” he added.

Tapping the capital markets fore foreign currency requires greater operations costs as well as risks, while deposit products are low cost and low maintenance.

In the first semester, RCBC introduce two -, three-, four- and five-year US dollar TDs with interest rates ranging from a low of 1.75 percent to 2.5 percent. It has been offering the plain vanilla 90-day, 180-day, and 360-day $-denominated TDs earlier.

Aside from the longer tenure and higher interest rates, RCBC also lowered the minimum initial placement to just $1,000.

The rational behind the low initial placement is to likewise encourage overseas Filipinos (OFs) to save and invest.

Foreign currencies or its peso-equivalent from remittances is one of the country’s main sources of its foreign currency reserves.

Roughly 90 percent of remittances are coursed through the banking system, often referred to as the formal sector.