BSP gradually lifts extraordinary measures

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) has started gradually withdrawing extraordinary measures introduced during the height of the community quarantine to limit the spread of the coronavirus disease 2019 or COVID-19 outbreak almost three months ago.

The central bank announced Monday evening the normalization of its monetary operations by resuming the auction of 14-day tenor at the term deposit facility (TDF) auction starting today as liquidity conditions continued to stabilize over the past weeks as the country starts to restart the economy amid the pandemic.

The BSP suspended the once a week TDF auction on March 18, two days after Malacañang placed the entire Luzon under the enhanced community quarantine to ensure sufficient liquidity in the financial system.

The auction committee resumed the auction of the seven-day term deposits last April 15 and is set to offer the 14-day tenor today, while the sale of the 28-day term deposits remains suspended.

The BSP is scheduled to offer P120 billion worth of seven-day term deposits and P20 billion worth of 14-day term deposits today.

“Consistent with its practice of assessing current financial system liquidity and market conditions in the conduct of its monetary operations, the BSP will gradually re-offer other tenors in its TDF,” it said.

Similarly, the central bank said it would double the volume of the overnight reverse repurchase (RRP) facility to P200 billion from the current level of P100 billion.

“The continued stabilization of liquidity conditions has been observed over the past weeks. Sustained high oversubscriptions in the TDF and RRP auctions indicate that financial market conditions are in place for a gradual normalization in the BSP’s monetary operations,” the central bank said.

As part of the extraordinary measures to mitigate the impact of COVID-19, the BSP also scaled down its overnight RRP volume offering by about P200 billion on April 8 to encourage counterparties to lend in the interbank market or re-channel their funds into other assets such as government securities or loans.

According to the BSP, the measured rescaling in the conduct of monetary policy implementation would also provide better guidance to short-term interest rates as the domestic economy slowly reopens.

“The reconfiguration in the auction volumes and tenors in the TDF and RRP are purely operational measures and remain in line with the stance of monetary policy. Moreover, the BSP stands ready to adjust the details of its operations based on market developments and liquidity conditions,” the central bank said.