MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) is on schedule to issue its own debt papers in the second half.
“We are on schedule. (The) BSP bonds will be launched in the second half of 2020 as promised,” said BSP Governor Benjamin Diokno.
President Duterte signed Republic Act 11211 or the amended New Central Bank Act in February last year, removing the condition that the issuance of certificates of indebtedness by the BSP would be made only in cases of extraordinary movement in price levels.
This gave the BSP an expanded toolkit as its authority to issue debt papers as part of its operations was restored. The new law also raised the capitalization of the central bank to P200 billion from the current P50 billion.
Diokno said the restoration of the central bank’s authority to issue its own debt papers has provided monetary authorities an additional policy instrument at its disposal.
The BSP is already in the final stages of crafting a policy framework for the debt papers that are targeted to be issued in the third quarter.
Pre-launch activities for the proposed “tradeable” securities have been affected by the enhanced community quarantine imposed in Luzon since March 16 to prevent further spread of the coronavirus.
Diokno said the central bank is working closely to complete an infrastructure technology system linking the monetary operations system of the BSP with the National Registry of Scripless Securities of the Bureau of the Treasury (BTr).
The new toolkit would further strengthen the transmission of the policy rate movements to the rest of the economy.
BSP Deputy Governor Francisco Dakila Jr. said the issuance of the securities would continue to be within the interest rate corridor (IRC) framework.
The BSP adopted the framework to guide short-term market rates towards the central bank’s policy rates. It is aimed at ensuring that money market rates move within a reasonable close range around the central bank’s policy rate.
Dakila said the planned securities would give the central bank additional instruments on top of the term deposit facility with tenors of seven, 14 and 28 days to enhance the transmission of the policy stance of the government.
The BSP suspended the TDF since March 18 to address the liquidity needs during the enhanced community quarantine. It resumed the operations of the liquidity absorption facility with the sale of the seven-day tenor last April 15 but the auction of the 14- and 28-day tenors remained suspended.