THE auction for P180 billion worth of term deposits offered Wednesday by Bangko Sentral ng Pilipinas to banks and trust entities is again highly oversubscribed by more than P82 billion on excess liquidity in the financial system.
Data showed the seven-day P30 billion deposits attracted total bids of P55.498 billion and fetched a weighted average accepted yield of 3.02. The 28-day P150 billion deposits lured total tenders of P207.4 billion and had a weighted average accepted yield of 3.41 percent.
Despite the oversubscription in the weekly auction, Bangko Sentral Deputy Governor Diwa Guinigundo said the current volume of P180 billion would be kept for the meantime. The auction calendar posted on the Bangko Sentral web site showed that the offering on Feb. 15 and 22 would still amount to P180 billion.
“We are on a wait-and-see [mode] because it would be hard to increase the volume and then render the market in a tighter condition. That is bad because we want to ensure that we help sustain the momentum of economic growth,” Guinigundo said in an interview.
“And if we reduce the volume, amid the continued M3 growth at 12.4 percent in December and 17.2 percent for domestic credit, it might result in too much liquidity… So at current levels of domestic liquidity, I think it is easier to manage at this level of liquidity and credits…,” Guinigundo said.
Guinigundo, however, said the possibility of reducing the reserve requirement of banks “remains on the table,” adding there were specific criteria for judging whether it was time to adjust it.
The reserve requirement stands at 20 percent for universal and commercial banks. Reserve requirement is a central bank regulation used by most of the world’s central banks that set the minimum fraction of customer deposits and notes that each commercial bank must hold as reserves rather than lend out.
Guinigundo said it was important to determine an existing tighter or liquid situation.
“We have to see all of these conditions for the adjustment in the reserve requirement and then what is going to be the monetary policy stance moving forward. When we talk about the monetary policy stance, we are talking about basically of the policy rate,” he said.
Previous over-subscriptions prompted the regulator to increase the weekly volume by P50 billion from the previous P130 billion to P180 billion starting Dec. 1, 2016 to more effectively siphon off excess liquidity in the financial system.
The amount of week-long deposits was increased by P20 billion to P30 billion from P10 billion, while the month-long deposits were raised by P30 billion to P150 billion from P120 billion.
The adjustment on Dec. 1 was the sixth time that Bangko Sentral increased the volume. From the original volume of P30 billion, it was raised to P50 billion, P70 billion, P90 billion, P110 billion and P130 billion.
Bangko Sentral adopted the interest rate corridor system in June last year so that through calibrated auctioning, the transmission of monetary policy would improve.
