kabibe game IMAs allowed to invest in central bank securities

LIQUIDITY MANAGEMENT Bangko Sentral ng Pilipinas Governor and Monetary Board Chair Eli Remolona Jr. issues new circular welcoming more participants in BSP securities. —PHOTO FROM FACEBOOK OF DEPARTMENT OF FINANCE

The Bangko Sentral ng Pilipinas (BSP) will now allow investment management accounts (IMA) of trust companies to be invested in central bank securities, continuing to deepen the market for its liquidity management tools in hopes of improving the absorption of excess money supply.

That is according to a two-page circular that BSP Governor Eli Remolona Jr. signed on Jan. 15, which will immediately take effect upon publication either in the Official Gazette or in a newspaper of general circulation.

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Simply put, the circular expanded the market participants in the offerings of BSP securities, which so far includes big banks, digital banks, thrift banks, as well as quasi-banks and trust entities.

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In the case of trust entities, the BSP said that apart from unit investment trust funds (UITFs), IMAs can also be invested in central bank securities.

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This also applies to secondary market trading of BSP securities.

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In an IMA, individual or corporate clients gain access to different financial markets without the need to transact with different brokers or counterparties.

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These funds are managed by the trust entities’ traders.

Counterparties

Last year, the BSP said it wanted to broaden the eligible counterparties that may participate in the trading of BSP securities.

By the closing bell, the benchmark Philippine Stock Exchange Index (PSEi) shed 0.26 percent, or 19.31 points, to 7,437, snapping a two-session winning streak.

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BSP securities are issued by the central bank as one of its tools for liquidity management in the financial system.

As much as possible, the central bank wants to avoid having too much money supply chasing too few goods because this can push up consumer prices.

The central bank mostly issues BSP bills with shorter tenors, but it can also offer BSP bonds with longer maturities when there is persistent excess liquidity that can fan inflation.

Remolona earlier said that allowing more market players to invest in BSP securities would help shorten the lag— currently estimated at nine to 12 months—in the transmission of monetary policy.

Last year, the BSP delivered three quarter-point cuts to its policy rate in a bid to boost economic growth.

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And more easing is on the table this yearkabibe game, with Remolona hinting at another rate reduction when the Monetary Board meets again next month.

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