Gov’t deposits to get prevailing rates
- Des Ferriols () - April 28, 2007 - 3:51am

The Bangko Sentral ng Pilipinas (BSP) said yesterday the deposit terms it would offer government corporations and pension funds would be “based on prevail-ing market rates.”
Amid speculations in the market, the BSP, however, declined to disclose specific details, except to say that market rates would be used to ensure that it would be attractive for government institutions to park their funds with the Bangko Sentral ng Pilipinas (BSP).
“These rates are related anyway,” said BSP Governor Amando M. Tetangco Jr., saying that the BSP is still mulling over the specific details of its mopping up operations.
The new measures, according to the BSP, are expected to ultimately slow down the growth in domestic liquidity to below 20 percent, a level that the BSP said it considered “sustainable and not inflationary.”
To address the potential risks related to the rapid liquidity growth, Tetangco said the Monetary Board has decided to encourage government-owned and con-trolled corporations (GOCCs) especially the Government Service Insurance System (GSIS) and the Social Security System (SSS) to deposit their funds with the BSP.
GOCCs normally use government depository banks but Tetangco said the BSP is willing to offer them better terms for their deposits.
Earlier, Tetangco said government institutions are likely to get less than banks get when they park their funds with the BSP under their special deposit accounts.
Yesterday, however, Tetangco said the rate is going to be  “based on prevailing market rates” but declined to indicate whether the BSP is willing to offer a pre-mium over market rates and if so, how much.
“We have to assess the market, look at the rates based on the market but still attractive enough for them to park their funds with the BSP,” he said. “The point of the whole exercise is to take liquidity away so the mechanics have to work towards that end.”
In addition to luring GOCC deposits away from banks, the BSP also decided it would allow trust department of banks to deposit with the BSP and allow the Special Deposit Accounts (SDAs) of banks to be counted as alternative compliance with the liquidity floor requirements for government deposits.
This way, Tetangco said banks could use their SDA placements when calculating their liquidity floor compliance for government deposits. Normally, banks buy government securities to comply with this requirement.
The move is expected to take some pressure off the Treasury bill (T-bill) market where rates have dropped to all-time lows since the government has steadily reduced its borrowing from both the foreign and the domestic market.

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